Is Carlos Ghosn After Chrysler or Ford

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October 23, 2007

The Wall St. Journal is reporting that Renault-Nissan (R-N) CEO, Carlos Ghosn is still open to an alliance with a U.S. manufacturer after his failed attempt last year to convince General Motors' (GM) management of the merits of such a deal.

For reasons GM outlined at the closure of the talks last fall, I suspect GM still has more to lose from an alliance with Renault-Nissan then will gain. More so today, given the recent ratification of a new labor agreement with the union which should substantially reduce their manufacturing cost and overhead.

With GM out of consideration, Ford or Chrysler are possible alliance candidates.

Ford:

Ford in my analysis would be an ideal fit for an Alliance with R-N. There is sufficient product overlap to share development cost, the Mercury dealer network would be an ideal division for Renault to export vehicles into the US as an attempt to salvage that brand and give Renault an indirect presence in the US market.

The biggest issue is the Ford family and their control of the voting stock. Also, much like GM, they may be on the cusp of turning the company around. With a suppressed stock price, a cash infusion of any value to Ford would mean giving up great control of the company. If, Ford's value was equal to R-N, I believe this would have the potential to be a great Alliance. After carefully analyzing the situation, I suspect this deal would not come to fruition for many of the reasons the deal with GM did not.

Chrysler:

I believe this is the most plausible alliance at this time. R-N, could purchase the 20% stake Daimler still retains or Cerberus and Daimler could dilute their share in Chrysler for an equity stake by R-N; the later being the most likely.

This could be a winning deal for Cerberus as Chrysler needs engineering resources, and capital. Also, Chrysler is in need of a global foot print R-N can offer. This deal would also enable Chrysler to share needed platforms and powertrains with their partners helping to improve their quality. More importantly, Ghosn's leadership could go a long way in improving the cultural at Chrysler. This was something Daimler failed to do during their 10 year ownership of the company.

Now, what does R-N get out of this alliance? I really am not certain sure. But I also questioned why Cerberus would want to get involved in automotive and own a full-line vehicle manufacturer.

The only brands at Chrysler worth wanting by a prospective suitor are Jeep and possibly some truck lines. For Ghosn, are the Chrysler and Dodge brands worth the headache? Apparently he may see a lot more potential than I.

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