General Motors Corp. (GM), Renault SA and Nissan Motor Co. Wednesday said they had broken off talks over a proposed alliance between the three automakers urged by GM's largest individual shareholder.
The break-up of the alliance talks after two months leaves Renault-Nissan free to pursue another partner as expectations build that it could now approach Ford Motor Co. (F), the struggling No. 2 U.S. automaker.
Ford shares gained 4 percent, or 33 cents, to $8.56 in afternoon trade, hitting their highest level in almost three weeks.
A GM alliance with Renault-Nissan had been backed by GM's largest individual shareholder, Kirk Kerkorian, who has a 9.9-percent stake in GM, which he has said he would consider raising to 12 percent.
Tracinda Corp., Kerkorian's investment firm, issued a brief statement Wednesday saying it regretted that GM's board had not brought in outside advisors to evaluate the tie-up, a step it had recently urged.
"We believe that GM's participation in a global alliance with Renault and Nissan would have enabled GM to realize substantial synergies and cost savings," Tracinda said. "We regret that the board did not obtain its own independent evaluation of the alliance."
GM, Renault and Nissan said in a joint statement that their talks had broken down because of a disagreement over whether the gains from a tie-up would be equally shared and how large those savings could have been.
GM had proposed that Renault-Nissan pay it an unspecified sum as a condition for closing the deal on the grounds that an alliance could have prevented the No. 1 automaker from concluding "other alliance opportunities." the statement said.
"Renault and Nissan consider that the principle of compensation is contrary to the spirit of any successful alliance," the joint statement said.
GM Chief Executive Rick Wagoner spoke on the phone to Carlos Ghosn, who heads both Renault and Nissan, earlier today, the third and final conversation between the two CEOs on the proposed alliance, according to a person familiar with the matter.
Wagoner had scheduled a news conference for later Wednesday at GM's headquarters in Detroit.
Shares of GM fell almost 2 percent in initial reaction to the break up of its alliance talks, but trimmed that loss in afternoon trade. GM shares were off 4 cents at $33.37 on the New York Stock Exchange.
DEAL HAD BEEN SEEN AS 'A LONG SHOT'
GM executives had said they were concerned the automaker would not share equally in the gains from a tie-up because of GM's larger size and progress it has already made in driving down global purchasing costs.
Many analysts had been skeptical of the proposed gains for GM in a sweeping tie-up with Renault-Nissan, although some had seen room for a more limited deal.
"A lot of things lined up that said that GM's heart really wasn't in this," Argus Research analyst Kevin Tynan said. "It was more a long shot that GM would be warm to this idea than that."
Richard Steinberg, president of Steinberg Global Asset Management, a Florida-based asset management firm that owns GM and GMAC bonds, said the end of the talks would not mean a return of business as usual for GM.
"There were a lot of moving parts in those discussions. The story probably isn't over with GM in terms of either further restructuring or alliances, and I think this is just a pause in the longer-term story," he said.
Ford had no comment on speculation that it would open talks with Renault-Nissan.
Frederique Le Greves, a spokeswoman for Nissan, said while the Franco-Japanese automotive alliance was open to a tie-up in the U.S. market it would not actively seek one now.
"If an opportunity came to us we would look at it and study it, just as we did with GM, but it's not something that we are looking for," she said.
Renault owns a controlling stake in Nissan.