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The Honolulu Advertiser
Posted on: Tuesday, July 4, 2006

Underneath GM, ground shifts

By Mike Householder
Associated Press

Workers at a Renault factory west of Paris assemble the Clio, a hot-selling minicar credited with restoring the French automaker's repu-tation and stature after it ran into financial difficulties in the 1980s.

MICHEL EULER | Associated Press

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DETROIT With the recent announcement that foreign competitors Renault SA and Nissan Motor Co. are considering purchasing a significant stake in General Motors Corp., the hunter has become the hunted.

GM, which not long ago used its power and size to buy into smaller, less-developed companies, now is potentially on the receiving end of such a transaction.

If the proposed partnership goes forward, it would reshape the global auto industry and may give struggling GM the aid it needs to revive.

Talk of a three-way alliance already is paying short-term dividends for the Detroit carmaker.

Bank of America auto analyst Ron Tadross yesterday upgraded GM to "neutral" from "sell." And GM shares soared nearly 9 percent on Friday, the day billionaire mogul and major GM shareholder Kirk Kerkorian said Renault and Nissan were interested in including GM in their alliance.

General Motors shares fell slightly 38 cents to $29.41 yesterday, in part because of expected subpar June sales results. GM's sales figures released yesterday showed it had sold 25.7 percent fewer vehicles than in June 2005. Year-to-date, GM's sales were down 12.2 percent.

Also yesterday, Nissan and Renault said they had approved opening talks with GM over the potential alliance. Renault owns a 44.4 percent stake in Nissan, which in turn owns a 15 percent stake in the French company, and the French automaker's board voted to negotiate with the U.S. company.

A message seeking comment was left yesterday for GM. On Friday, GM said in a statement the Kerkorian request would "be taken under advisement" by its board of directors.

Carlos Ghosn, chief executive of both Renault and Nissan, has discussed the matter with Kerkorian and is willing to talk to GM, according to a separate statement by Nissan and Renault.

Talk of an alliance comes as GM is moving forward on an extensive turnaround plan designed to improve its poorly performing North American division, suffering from declining profits, high labor costs and growing competition from Asian automakers such as Nissan. GM announced plans last year to close 12 plants by 2008 and recently said 35,000 hourly workers had agreed to retire early or accept a buyout offer.

Nissan was near bankruptcy when Ghosn was dispatched by Renault to lead the company in 1999.

The Brazilian-born Ghosn engineered a cost-cutting and morale-boosting campaign that revived the automaker.