just-auto.com

PARIS SHOW: Partnerships, costs and competition occupy automakers

By just-auto.com editorial team | 28 September 2006

Automakers are displaying dozens of new models but attention at the Paris motor show on Thursday was dominated by talks on the sidelines about possible new partnerships to combat the rising costs and increasingly fierce competition besetting the industry, the Associated Press reported.

The Mondial de L'Automobile is to showcase more than 60 new models and concept cars from manufacturers from Detroit to China and is expected to draw more than a million visitors, AP said, noting that the glamour of new designs and products has been overshadowed by an industry facing troubled times.

Ahead of the event, talks between General Motors on a possible alliance with Renault and Nissan Motor dominated the headlines so far, AP noted.

For the first time, GM said clearly that it was unhappy with the plan on the table, as chief executive Rick Wagoner met for talks with Renault and Nissan CEO Carlos Ghosn on the eve of the show, the news agency said, adding that Wagoner said on Thursday that he was seeking "fair value" in the talks and that they could be extended beyond the 15 October deadline.

Speaking after a company presentation, Wagoner said he had had "candid" discussions with Ghosn, but declined to elaborate. "Our primary focus has to be doing what's right for General Motors," Wagoner told the Associated Press.

Wagoner reportedly added that the pace of GM's turnaround in North America has "shocked people" and instilled confidence that its blueprint is solid. The company recently announced plans to close 12 plants by 2008, slash its work force and cut costs amid intense competition from Asian rivals.

While some have argued GM needs an alliance in order to maintain its top ranking in the auto industry in terms of sales and production, Wagoner said the company has proven it can take on top global car-making rival, Toyota Motor Corp., if given a "level playing field", AP's report added.

He reportedly pointed to China, where GM has become the leader after joining the market in 1999, as evidence the company can compete. AP said some analysts are also sceptical of the benefits of an alliance.

The proposed GM-Nissan-Renault tie-up could be "counterproductive if it allows a capacity-restrained competitor access to GM plants, thus accelerating GM market share losses," Standard and Poor's analyst Efraim Levy said in a Wednesday note to investors cited by the news agency.

According to AP, Levy and others saw a reported cash demand by GM as reducing the likelihood of a deal. "Although we expect the companies to continue discussions, we view a major agreement to be unlikely," he said.

But Ghosn told reporters at the show on Thursday that the Renault, Nissan and GM teams were "trying to bridge their differences."

The three companies' positions "are not far apart," he reportedly said. "In discussions like these there are always differences."

According to the news agency, US critics of the alliance project say Renault and Nissan would win more savings from systems integration than GM, which already has a global system for IT and product development. Unlike GM, Renault and Nissan also have no heavy-duty truck platforms in the United States or hybrid vehicles powered by a combination of petrol and either electricity or green fuels.

AP noted that, in a briefing with newspaper and magazine journalists earlier this week, senior Renault negotiator Patrick Pelata said GM needs the savings an alliance would bring to fight off ever-tougher competition from Toyota. The alternative, Pelata was reported as saying, was to "wait for a miracle, or an earthquake in Japan."

The president of Toyota said his company's business strategy won't be affected by a possible alliance between General Motors, Nissan and Renault, according to a Thursday news story AP cited in its report.

Regardless of the outcome of the talks, which could result in an automotive juggernaut spanning the globe, "Toyota will keep carrying on its strategy," Katsuaki Watanabe was reported as saying by the Kyodo News agency from France, where he was to attend the motor show.