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Last Updated: Wednesday, 4 October 2006, 21:46 GMT 22:46 UK
GM ends talks with Renault-Nissan
Customer looks at a Buick model in Michigan
Nissan and Renault have walked away from merger talks with GM
US car firm General Motors has ended talks with car alliance Renault-Nissan to form a global partnership.

GM wanted to receive compensation from Renault and Nissan - which are already partners - as part of the deal, but they were opposed to this.

Renault and Nissan said they thought "compensation would be contrary to the spirit of any successful alliance".

The three-way tie-up was proposed in June by GM shareholder Kirk Kerkorian in an attempt to boost GM's position.

Next steps

GM justified its demand for payment on the grounds that it would have benefited less from the merger than the two other firms.

The US company said if the deal had been agreed, this would have stopped it from joining with other firms - a strategic limitation for which it should have been compensated.

The decision to end talks comes ahead of the self-imposed 15 October deadline, by which the firms had to decide whether to proceed with full-scale talks.

But after the head of GM, Rick Wagoner, and Renault-Nissan chief executive Carlos Ghosn recently met in Paris, GM officials expressed reservations about the terms of the partnership.

With talks over, it is now thought Renault-Nissan might look elsewhere for partners, and some analysts say Ford could be a potential ally.

Restructuring

GM, which sells more cars every year than any other carmaker, has seen its fortunes decline following higher labour costs and increased competition from Japanese rivals.

In 2005, the firm saw losses of $10.6bn (8.3bn euros; 5.5bn).

In an effort to turn around the iconic firm, GM embarked on significant job cuts and restructuring plans that included plant closures.

After the news that the merger talks were over, Mr Kerkorian - who holds nearly 10% of the firm - said: "We believe that General Motors' participation in a global alliance would have enabled GM to realise substantial synergies and cost savings."

Shares in GM fell on the news by more than 1%, but closed only 0.18% lower. Meanwhile Nissan closed 1% higher and Renault added 0.7%.

Carlos Ghosn, who heads both firms, developed a strong reputation for having successfully turned around the fortunes of Nissan.

Renault owns a 44.4% controlling stake in Nissan, which in turn has a 15% stake in its French partner.






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