Nissan, Renault Mull Up to 20 Percent Capital Investment in Outstanding GM Shares

TOKYO July 1, 2006; The AP reported that automakers Nissan Motor Co. and Renault SA are considering buying up to 20 percent of outstanding shares in General Motors Corp., Kyodo News agency reported Saturday.

Details of the possible investment plan surfaced after billionaire investor Kirk Kerkorian proposed on Friday that GM join the Nissan-Renault alliance, Kyodo said.

The report did not say how much the investment would cost.

If it materializes, the deal will create a huge auto alliance with annual output exceeding 15 million vehicles and commanding nearly one-quarter of global market share, Kyodo said.

Nissan officials were not available for comment Saturday.

Kerkorian's company, Tracinda Corp., a large minority shareholder in the U.S. automaker, told GM Chairman and Chief Executive Rick Wagoner in a letter Friday that the French and Japanese companies are receptive to the idea of including GM in their partnership, and in purchasing "a significant minority interest" in the automaker, the company said Friday.

In a statement Friday, GM said the Tracinda request "will be taken under advisement" by its board of directors. The automaker said it has not received any offers or proposals from Renault/Nissan about an alliance.

Nissan said in a statement that Chairman Carlos Ghosn had been approached by Tracinda "to assess the merits of GM joining the Renault Nissan Alliance."

"At this point, it is necessary that the GM Board and top management fully support this project in order to start the study of this opportunity after agreement of Renault and Nissan boards," Nissan said, adding that its alliance with Renault was an "open partnership" and "under the right circumstances and with the appropriate partners ... could be expanded further."

When Kerkorian approached Ghosn last month, the Nissan chief showed interest in purchasing up to 10 percent in GM, with Renault buying the other 10 percent stake, according Japanese business daily Nihon Keizai.

GM has been engaged in an extensive turnaround plan in North America amid declining profits, high labor costs and growing competition from Asian automakers. The automaker announced plans last year to close 12 plants by 2008 and earlier this week said 35,000 hourly workers had agreed to retire early or accept a buyout offer.

Tracinda owns 9.9 percent of GM's common stock and is GM's third-largest shareholder.

Renault owns a 44.4 percent stake in Nissan, which in turn owns a 15 percent stake in Renault. Nissan was on the brink of bankruptcy when Ghosn was dispatched by Renault to lead the Japanese company in 1999.