What a difference three mere months can make. Since rumours of a ménage à trois involving Renault, Nissan and General Motors surfaced at the end of June, shares in the US carmaker have risen more than 25 per cent. News that the two sides still appear far apart in spite of all the cordial chit-chat has done little to damp enthusiasm among investors.
Kirk Kerkorian, GM’s largest shareholder, clearly continues to think that the company could do with a saviour like Carlos Ghosn, Renault-Nissan’s revered boss. Helpfully, however, Mr Kerkorian’s investment vehicle has also expressed a desire to increase its GM stake from 9.9 per cent to up to 12 per cent, if it secures regulatory blessings. That may be intended to keep up the pressure on GM’s board. But in the short-term, it should also ease any disappointment over Renault.
Increasingly, the conventional wisdom is that GM is well on track to secure a recovery on its own. This is odd, given the carmaker’s recent operating performance. Progress on cost-cuts is certainly encouraging. But beyond such accounting goodies as tax-credits and warranty provisions, there are few signs that it is about to make money from making cars.
First-half results suggested that inventories were piling up. That could well prove a drag, especially as competitors have lately appeared to offer even more aggressive discounts than usual. Meanwhile, the risk of a cash-draining strike at Delphi, GM’s parts supplier, may be receding but remains real enough.
On top of that, it is worth remembering that GM’s recent calamities arose during an unprecedented spending spree among US consumers. Any trouble on that front could all too easily derail its recovery. While the long-term benefits of an alliance still look skewed in favour of Renault-Nissan, Mr Ghosn would be unwise to agree to any large upfront payments to a partner whose woes may be far from over.