Hitt og þetta 28. september 2006

DJ THE SKEPTIC: The Merger That Dares Not Speak Its Name

By Howard Wheeldon

LONDON (Dow Jones)--If GM, Renault and Nissan Motors forge an alliance, investors will be in for a rough ride given the complexity of such an ambitious project.

But they shouldn't worry. At this stage, the chances of an alliance seeing the light of day look remote.

For a start, GM's demand that Nissan and Renault pay up as part of any deal, in compensation for a purported higher value that GM has, isn't something that Renault and Nissan CEO Carlos Ghosn is going to take seriously.

Ghosn has packed his punches in arguing an alliance would enable the automakers to cope better with fierce competition and GM's U.S. overcapacity. But it's premised on a tie-up that treats the companies as equal partners.

If Ghosn fails with GM as it looks as he has, he might then turn his attentions to an alliance with Ford. Not that he is likely to get that much further with the ailing Dearborn-based car manufacturer.

The plain truth is that cultural, industrial and financial differences make any kind of European-Japanese-U.S. alliance hard to envisage.

But neither GM or Ford have got more than a couple of years left to sort out themselves out before investors start forcing the pace.

So if one or other should fail with their current restructuring plans, then the most radical solution to the problems facing the U.S. auto industry must be that GM and Ford merge.

It's an idea that, deep down, everyone thinks about, but few are prepared to say out loud.

An alliance between either of the big two U.S. carmakers and a European or Asian player makes little sense unless existing U.S. carmaking-capacity is paired to the bone.

For political reasons, it's hard to see that happening because of the impact it would have on the U.S. jobs market. Any solution involving even more massive layoffs would have to be home-grown to work.

Indeed, it's arguable that whatever the problems GM and Ford face, they need Renault-Nissan less than Renault-Nissan need help in shoring up their share of the European market and getting greater access to the North American one.

It's hard to criticize GM-shareholder Kirk Kerkorian for raising the stakes in pushing the idea of an alliance, but he and his backers will have to go back to the drawing board.

Now, GM's and Ford's trade unions and workers aren't likely to welcome any solution that emerges. They have little choice such are the companies' difficulties.

But for investors, a GM-Ford merger may be the only way management is going to restore some faith in the future of the U.S. auto industry.

(Howard Wheeldon was a senior equities analyst for 20 years, and has been a columnist at Dow Jones for the past four years. He can be reached at +44 207-842-9251 or by e-mail: howard.wheeldon@dowjones.com)

(END) Dow Jones Newswires

September 27, 2006 08:03 ET (12:03 GMT)

Copyright (c) 2006 Dow Jones & Company, Inc.

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