By Doron Levin
Bloomberg
September 27, 2006
SourceSept. 28 (Bloomberg) -- Billionaire Ross Perot once said ``you can't help folks who don't want to be helped.''
Perot said this in 1984, in frustration with General Motors Corp. Perot, then a GM director, had turned from investor into gadfly, hectoring GM to improve its competitiveness against upstarts like Toyota Motor Corp. and Honda Motor Co.
Carlos Ghosn, chairman of Renault SA and Nissan Motor Co., now realizes Perot uncovered an essential truth about GM. GM, after a net loss of $10.6 billion last year and more troubled than ever, is signaling Ghosn it doesn't need help in the form of an alliance with Renault and Nissan.
Well, GM does need a reversal of fortune, and soon. The company's U.S. market share is near an 80-year low. The No. 1 automaker in terms of vehicle sales no longer even tries to forecast for Wall Street when it will earn an annual profit again.
Ghosn and GM Chief Executive Officer Rick Wagoner probably will wind up their discussions of forming an alliance by Oct. 15. When that happens, Ghosn ought to walk away quickly and thank his lucky stars he didn't make a deal with GM, which is convinced its own turnaround plan will succeed.
A half-hearted, awkward partnership with GM would only threaten to dilute the fragile chemistry that Ghosn has worked hard to achieve in his own companies, which are facing a withering onslaught by Toyota in Europe, as well as the U.S.
Renault and Nissan, under Ghosn's leadership, have spent the past seven years creating an impressive alliance based on mutual assistance, while respecting one another's independence. The two automakers share engine and body designs, study one another's purchasing practices and savor every chance to save a few euros or yen.
Avoiding Duplication
Only a handful of the two automakers' designers may inspect one another's drawings, to preserve the brands' distinctiveness. If a future model begins to resemble one under development by the other partner, changes are made. Even so, they face a daunting challenge to keep growing and spreading fixed costs over more units of volume.
Avoiding duplicative effort and expense is at the heart of the alliance. Kazumasa Katoh, Renault's senior vice president in charge of engines and transmissions, has overseen a reduction in the type of engines produced by the two carmakers to 17 from 29. The ideal number now is eight, he said, and might drop to four.
Renault and Nissan models share only three engines. Few owners know that and fewer care. But accrued savings since 1999, when the alliance began, total in the ``hundreds of millions of dollars,'' Katoh said, one of the few dozen executives to transfer from Nissan to Renault.
Laid Low
In 1999 Katoh was deputy manager of engines at Nissan, a once-great company laid low by mismanagement. ``Nissan employees knew that without some kind of help, we would have gone bankrupt,'' he said.
Nissan's chairman had offered to marry off his battered company to Ford Motor Co., which declined. DaimlerChrysler AG later agreed to ally with Nissan, only to back out. Renault was the third choice, the only automaker willing to attach itself to a sinking ship.
Nissan was almost kaput in 1999, a desperate case. It needed a rescuer, which put Nissan managers in a frame of mind to cooperate when Ghosn went to Japan, preaching his theories of efficiency based on sharing information and adopting whichever company's vehicle designs and business practices were best.
Ghosn talks today constantly and publicly about the importance of increasing sales and generating profits. He says larger scale and efficient investment are the only chance for staying in business against burgeoning Asian carmakers, not to mention ``the beast,'' his nickname for Toyota.
Old Message
Wagoner, by contrast, says GM can be profitable as it gets smaller. Employee buyouts and efficiency moves are producing results worldwide, the company says, and savings eventually will flow to the bottom line. New models such as the GMC Acadia and Buick Enclave, car-based crossover utility vehicles, raise expectations for a rebound in sales and market share.
The world has heard GM's message before. In the early 1990s the automaker was near collapse and invested in large sport- utility vehicles and pickup trucks for the U.S. Short-changing cars and plowing billions of dollars into trucks worked well until gas prices soared and consumers began clamoring for more fuel-efficient vehicles.
Jerry York, the GM director and associate of billionaire Kirk Kerkorian, who owns 9.9 percent of GM, is Ross Perot's modern-day equivalent. York and Kerkorian suggested the alliance with Renault and Nissan for the purpose of salvaging Kerkorian's stake.
GM's managers don't think they need to ally with Renault, Nissan or anyone else. Until they understand that the company needs help, there's no guarantee it can be saved.
(Doron Levin is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Doron Levin in Southfield, Michigan at
dlevin5@bloomberg.netLast Updated: September 27, 2006 23:59 EDT