Behind the GM-Nissan Dance

Behind the GM-Nissan Dance
Jerry Flint

The bean counters at General Motors, Nissan and Renault are very busy right now, trying to figure out how many beans they might save by combining operations. That is a 90-day trip to Fantasy Island. But to clear it all up, here are the answers to questions you wanted to ask.

Can the present General Motors managers save GM?
Doubtful. They haven't been able to do it in 14 years, so it's optimistic to think they can now.

But isn't General Motors turning around now--slowly, but turning?
Not really. The crisis will intensify as fuel prices hurt the sales of full-size pickups, as the pressure grows to return to give-away prices and as the union resists givebacks.

Carlos Ghosn, who heads Renault and Nissan, is credited with saving the Japanese company. Is he getting too much credit?
No. He cut debt by selling off shares in suppliers and real estate. He cut supplier prices by ending the cozy keiretsu deals. But the most important thing he did was to get the lead out. He doesn't even speak Japanese, but he got the workers together, working fast, throwing out losing traditions.

If the deal goes through, would this put Captain Kirk in the driver's seat at GM?
Forget that. Kerkorian would have his 10% and nothing more. If Carlos Ghosn goes into GM, he runs his own show and is no patsy for this shareholder or anyone else.

Is Rick Wagoner Jr., the GM chief executive, going to sabotage his talks with Carlos Ghosn?
Absolutely not. Rick wouldn't tarnish his honor that way, not for the job, not for anything. He'll play it straight.

Would Ghosn end up running GM?
He might, or he might pick new GM managers and visit them every two weeks. But make no mistake, he'd be the boss.

Why would Ghosn want to take on this burden?
That is the hardest question of all. Possible answer: Godzilla. No one knows how to stop Toyota from devouring the entire auto world. This is a Godzilla-stopper.

So the GM board would be the big opposition?
No. The French government, which owns a piece of Renault, would be the big opposition. It is always paranoid.

Would GM's board and top officers approve?
Possibly. It would get them off the hook. The directors don't want to go into history as the board that couldn't save GM.

Wouldn't there be huge savings from a tie-up?
No. GM suppliers are losing money now, going bankrupt in the U.S. now. So how much lower can Ghosn make their prices? Saving money on common designs, common engines and transmissions, and common parts is another myth. Whose common designs would the combine use? Nissan sales are sagging in the U.S., Europe and Japan, so what's to borrow? As for Renault, it has failed in the U.S. market. Could there be savings in Europe? The French could shut their factories, fire workers and badge German-made GM Opels as Renaults--or the Germans could shut their factories and put the Opel's lightning-bolt symbol on French-made Renaults. Forget it. Those proposals would start a European war faster than an archduke's assassination. Cost savings can come from shutting factories and firing designers and engineers, but then there's the problem of whose people get the ax.

Then the sole purpose of the exercise, excluding pushing up the stock price for Captain Kirk, would be … ?
To get Ghosn to Detroit, to get the lead out and to slow down Godzilla's advance by confronting it with a bigger car conglomerate than exists now.

Will it happen?
Maybe. When Dieter Zetsche, the chief executive of DaimlerChrysler, was asked about the potential combination, he said that sometimes "the news in itself is the purpose, not necessarily leading to a result." He meant that the mere talk of the combination may accomplish Kerkorian's objective, which is to push up the stock price. Dieter knows both sides of the auto merger (or partial merger) game, having come to America for Daimler and turned around the failing Chrysler acquisition while watching, from afar, as Daimler's deals with Mitsubishi and Hyundai went up in smoke.

Jerry Flint, a former Forbes Senior Editor, has covered the automobile industry since 1958. Visit his homepage at www.forbes.com/flint.