Nissan Board Meets on GM

TOKYO July 3, 2006; Reuters reported that Nissan Motor Co. said on Monday its board would meet soon to discuss a proposal by billionaire investor Kirk Kerkorian to consider adding cash-strapped General Motors Corp. to its alliance with Renault SA (RENA.PA).

Shares in Nissan, Japan's second-biggest auto maker, edged up on the news, ending morning trade up 0.72 percent at 1,259 yen. The benchmark Nikkei average gained 0.48 percent, while other car stocks ranged from flat to 2.42 percent higher.

Analysts said it was too early to tell what kind of impact a new partnership with GM would have on Nissan, or whether the board would take in the proposal at all.

"We are not opposed to a (three-way) partnership in itself, but the risks, including the burden on (Nissan's) finances and a possible cannibalization of sales in various markets, must be weighed carefully," Mizuho Securities' auto analyst Yoshio Watanabe wrote in a report.

The proposal by Kerkorian, who owns about 10 percent of GM through his investment company, Tracinda Corp., must first receive support by the U.S. auto maker's board to be considered by Nissan and Renault.

A source familiar with the situation has said that Carlos Ghosn, chief executive of both Nissan and Renault, expressed interest in acquiring a stake of up to 20 percent in the world's largest auto maker at a dinner with Kerkorian several days ago.

That would amount to about $3.37 billion at GM's closing share price on Friday, when it jumped 8.56 percent to $29.79 on news of Kerkorian's proposal.

A top Nissan spokesman said there had been no proposal to GM from the Nissan-Renault alliance, adding the boards of both companies would meet simply to explore the possibilities and consider Kerkorian's request. Renault's board could meet as early as Monday, a French minister said.

Renault, valued at $30.6 billion, has a 44 percent stake in Nissan, which in turn owns 15 percent of the French car maker. GM's market capitalization stood at $16.85 billion as of Friday, while Nissan is worth $49.1 billion.

Ghosn, credited for rescuing Nissan from the brink of bankruptcy in 1999, has repeatedly said the Nissan-Renault alliance could be expanded to other car makers if the circumstances were right, but has stressed an equity partnership was not a prerequisite for strategic cooperation.

Nissan and Renault's 7-year alliance is considered a rare example of a successful equity partnership in the industry.

Nissan recently sealed a broad, non-equity cooperation deal with Japanese compact car maker Suzuki Motor Corp. (7269.T) under which they would supply each other with vehicles and share production facilities.

GM held one-fifth of Suzuki Motor until March, but sold off all but a 3 percent stake to raise much-needed cash. The two companies have retained their operational cooperation despite the reduced stake.