One month after they said they would study a possible tie-up, the Nissan Motor-Renault alliance and General Motors reportedly are still weighing the pros and cons of the proposed deal.
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While the three automakers have formed one team each to discuss some 10 categories of issues such as joint parts procurement, the business outlook seems to be brightening up for the world’s top automaker, which plunged into the red last year for the first time in 13 years with a group net loss of $8.55bn, Kyodo News said.
Since GM is said to be less than enthusiastic about a possible tie-up with the Japanese-French alliance, forming a three-way deal will greatly depend on whether its benefits would outweigh those that GM could achieve if it restructures itself on its own, industry watchers told the news agency.
The three companies are now trying to quantify the anticipated benefits and risks of joining forces in about 10 kinds of activities including joint procurement, research and development and outsourcing production among the three.
If Nissan and Renault are to convince their shareholders of the merit of teaming up with GM, they have to back up their argument with solid data, Carlos Ghosn, who is president at both Nissan and Renault, said in a briefing held for securities analysts in late July.
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By GlobalDataGhosn also said the Nissan-Renault alliance will not form a partnership with GM if the benefits of the deal outweigh its risks only by a small margin.
Still, Ghosn sounded upbeat about the possible benefits. He pointed out, for example, that GM purchases $100bn worth of parts annually and that the similar cost for Nissan-Renault is $80bn. If joint procurement reduces their expenses by just 1%, the cost saving would amount to $1.8bn, Ghosn said, according to Kyodo News.
It noted that GM began the talks with Nissan-Renault at the prodding of itsbnaire investor Kirk Kerkorian after posting the massive red-ink figure last year on weak sales in North America but is now growing increasingly confident about turning around its operations on its own.
In the April-June quarter, the company saw a consolidated net loss of $3.4bn but sales jumped 12.2% year on year to $54.3bn. The result for the quarter would have been a profit of $1bn if it were not for one-off costs entailed by personnel cuts and other restructuring measures.
Meanwhile, both Nissan and Renault saw their global sales in the first six months of this year fall year on year. ”Whether the two can strike the deal with GM should hinge on how much their sales will recover,” one securities analyst told Kyodo News.
Given their business condition, allying with GM might definitely appeal to Nissan-Renault.
The three companies have until mid-October to wrap up their negotiations.
Ghosn reportedly said that he will meet with Wagoner again after the findings of the ongoing study about the benefits of the three-way tie-up are out and that all parties would move on to the next stage if they agree to work together.
In such an event, a capital tie-up could become a possibility, industry observers told Kyodo News.
