Renault-Nissan, GM CEOs meet, confirm Oct deadline

PARIS, Sep 27 (Reuters) General Motors Corp. will continue talks until mid-October with Renault-Nissan aimed at creating a global alliance, both sides said in a joint statement on Wednesday after their chief executives met.

GM CEO Rick Wagoner met on the eve of the Paris auto show with Carlos Ghosn, who heads both Renault SA and Japan's Nissan Motor Co., both sides confirmed.

It was the first meeting between the two executives since they huddled in mid-July in Detroit and agreed to a 90-day study of a potential alliance.

Analysts have become increasingly skeptical that GM will agree to the kind of sweeping global deal that Ghosn has outlined because of the U.S. automaker's progress in recent months in cutting costs.

In the joint statement, GM and Renault-Nissan said executive teams at all three companies were still working on a study of ''how an alliance could generate significant shareholder value for each company.'' ''Following today's meeting it has been confirmed that the teams will continue (their) studies to the planned mid-October completion date,'' the statement said.

No other details were given and both sides said they would not comment further.

The alliance talks were first urged by Kirk Kerkorian, the billionaire investor with a 9.9 percent stake in GM, who met with Ghosn this summer.

Kerkorian's investment company, Tracinda Corp., had no comment on the developing talks, a spokeswoman told Reuters.

UNDISCLOSED LOCATION The talks between Wagoner and Ghosn were held at an undisclosed location. The Paris auto show is one of the major events in the auto industry.

GM, which lost .6 billion last year, has seen its U.S. market share fall to about 25 percent, about half of its peak from the 1970s. Largely as a result, Japan's Toyota Motor Corp. is on track to overtake GM as the world's largest automaker by volume.

Like its Detroit-based rivals, GM has been hurt by its reliance on trucks and SUVs at a time when U.S. consumers have begun to favor lighter, more fuel-efficient passenger cars, an area of the market dominated by Japanese car makers.

GM Chief Financial Officer Fritz Henderson told analysts in Paris on Tuesday that GM would carry out a ''thoughtful, thorough and objective'' assessment of the benefits of a tie-up with Renault and Nissan.

But he also said that GM would have to consider how the potential benefits of an expanded alliance would be shared, and whether that would fairly reward GM shareholders.

That comment was interpreted by some analysts as another sign that GM management sees itself in a stronger negotiating position that could scuttle the talks.

''There are a lot of issues surrounding the potential alliance,'' GM spokesman Tony Cervone said, declining to be specific on the talks. ''There is a feeling that there is some disproportionate synergies that need to be considered.'' The Wall Street Journal reported on Wednesday that GM would demand billions of dollars from Renault and Nissan for agreeing to any alliance and said this was the latest sign the proposed deal was in trouble.

Cervone declined to comment on the report.

Thomas Leritz, a portfolio manager with Argent Capital Management, who follows the auto industry but does not own any auto stocks, said GM needed an alliance given the growing pressure from Toyota and Japan's Honda Motor Co.

''When you have an industry that's coming under pressure, the weaker players can combine to create better economies of scale to lower overall costs to compete better with the more dominant players like Toyota,'' he said.

''Given GM's problems, they need to do drastic things in order to survive and thrive in this market place,'' Leritz said.

GM's 8.375-percent bonds due in 2033 rose in early trading by less than a cent on the dollar to 86.25 cents. Its yield fell to about 9.8 percent, according to MarketAxess data.

GM shares were up 2.8 percent, or 87 cents, to .28 on the New York Stock Exchange in late morning trade. The stock is up about 65 percent since the start of the year.

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