GM Alliance Talks End

Negotiations break down after GM demands compensation from Nissan-Renault.
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Updated from 2:37 p.m. EDT

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have ended talks about forming a global alliance after failing to come to terms on payments for the deal.

In a joint statement Wednesday, the companies said the parties recognized the synergies that would result from the alliance, but the sides couldn't agree on the distribution of those benefits.

GM sought compensation as part of the potential tie-up, while Renault and Nissan "consider that the principle of compensation is contrary to the spirt of any successful alliance," the statement said.

The Wall Street Journal

, which first reported the breakdown of the deal talks, said GM demanded that Nissan-Renault pay it a "control premium" if it bought 20% of GM's stock as part of a deal. The newspaper cited an unnamed source as saying that CEO Rick Wagoner told his board Tuesday that investment bankers advised GM to secure the premium because such an alliance would prevent the automaker from making any other joint ventures.

Wagoner had met with Nissan-Renault CEO Carlos Ghosn in Paris just last week to explore the possibility of a deal. No agreement was reached, but GM said at the time that the two sides planned to continue discussions until mid-October.

Ghosn indicated to reporters after the Paris meeting that Wagoner was resisting a deal, and he said that if negotiations failed, his company would explore an alliance with other U.S.-based automakers, like


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GM's largest shareholder, Kirk Kerkorian's Tracinda Corp., expressed disappointment with Wagoner's approach to the negotiations.

"We believe that General Motors' participation in a global alliance with Renault and Nissan would have enabled General Motors to realize substantial synergies and cost savings," said Carrie Bloom, a spokeswoman for Tracinda. "We regret that the board did not obtain its own independent evaluation of the alliance."

Kerkorian was publicly supportive of a global alliance in order to kick-start GM's ongoing restructuring efforts, which have already boosted the automaker's stock by 73% so far in 2006. Early reports indicated that Wagoner was initially opposed to such an alliance.

Last week, Kerkorian said his firm plans to purchase up to 12 million more shares of the automaker, which would give it more than a 10% stake. He also re-emphasized his support for the Nissan-Renault deal.

Wagoner's failure to come to terms with Ghosn could hurt relations between him and Kerkorian and possibly set the stage for a fight over control of the company as Tracinda builds up its ownership.

Tracinda already succeeded in installing its representative, Jerry York, onto GM's board. Since York's board arrival in February, GM slashed its dividend payment in half and agreed to sell majority stakes in its residential mortgage and financing businesses. The company also executed a massive employee-buyout plan.

GM shares recently were down 20 cents, or 0.6%, to $33.21.

Shares of Ford rose 29 cents, or 3.5%, to $8.52. The No. 2 U.S. automaker reportedly has told Ghosn that it would like to enter negotiations for an alliance should the GM talks fall through.

A spokesman for Ford said the company had no comment on the situation.