Renault, Geely Consider Deals for GM Units

Renault, Geely Consider Deals for GM Units

By

JOHN D. STOLL and NORIHIKO SHIROUZU

General Motors

 

Corp. is in talks about potentially turning its Saturn division over to Renault SA, allowing the French auto maker to use the brand as a launching pad for growth in North America, two people familiar with the matter said.Geely Automobile Holdings Ltd. has submitted a bid to acquire GM’s Saab unit, people familiar with the situation said.Nissan Motor Corp. and South Korea’s Samsung Motors — the French auto maker could eventually use the Saturn network of 400-plus dealers to sell its own cars, including vehicles made by Renault or Samsung and sold as Saturns, the people familiar with the matter said. The Saturn brand has a strong reputation for customer service but has been hindered under GM’s ownership due to a lack of consistent innovation.Carlos Ghosn‘s goal of getting a better foothold in the U.S. market. The company already boasts a large presence in the region thanks to Nissan’s sprawling operations based in Tennessee, but capturing Saturn would give Mr. Ghosn an American brand and an outlet for vehicles designed in Korea or Europe that could compete in the U.S. when it comes to meeting the demand for fuel-efficiency or value.john.stoll@wsj.com and Norihiko Shirouzu at norihiko.shirouzu@wsj.com

Meanwhile,

Renault is one of several auto makers and other suitors interested in taking Saturn over from GM. The U.S. auto maker is surviving on $15.4 billion in government loans and is under pressure to restructure its balance sheet, union contracts and operations by June 1, or face a bankruptcy filing.

GM is considering several options for Saturn, including closing the brand all together.

Any buyer of the Saturn division likely wouldn’t put direct cash in the deal, but would need to take on liabilities and the costs of running the business, including production.

Under a deal with Renault — which controls Japan’s

By essentially giving the brand to another auto maker, GM could preserve jobs in the U.S. and avoid the messy dispute with dealers that could come if GM just killed Saturn.

Renault could eventually build Saturn vehicles in the U.S. if the brand supports solid sales volumes, a person said. But any move with Saturn needs the blessing of the U.S. Treasury Department.

Renault’s control of Saturn could help further Chief Executive

In recent years, Mr. Ghosn has held alliance negotiations with GM and Chrysler but failed to strike a deal. In 2006, after spending months researching a tie-up, GM rejected a proposed equity alliance with Renault-Nissan, saying that the deal was better for Mr. Ghosn than GM.

GM is looking to scale back operations in the U.S. after running out of cash in December and has been searching for a buyer of the 20-year-old Saturn business since February. GM currently plans to quit building Saturn’s five models by the end of this year, effectively choking off the supply for dealers.

Some of these dealers have been working to save Saturn by forming investor groups or helping GM find a buyer for the brand. GM may be open to building Saturn products on a contract basis under the right circumstances.

GM also is in talks with potential suitors for its Hummer brand in the U.S., and its Opel divisions in Germany.

Geely is one of "three to four" serious bidders for Saab and appears to be the only bidder from China, one of the people familiar with the situation said. He said a second Chinese auto maker considered bidding but didn’t follow through with an offer. Details of Geely’s bid for Saab couldn’t be determined. Geely Spokesman Wang Ziliang declined to comment.

Its bid for Saab comes just weeks after it submitted a separate bid for Ford Motor Co.’s Volvo unit, also based in Sweden. It wasn’t immediately clear what prompted Geely to bid for a second auto maker. The Saab bid could be designed to pressure Ford to respond to Geely’s bid for Volvo, or to raise Geely’s chances of obtaining a foreign car maker in case the Volvo effort falls through.

A team of executives from Geely traveled to Sweden during the past few weeks to tour Saab’s production and research-and-development facilities, and to meet with members of the Swedish auto maker’s management team, according to two people familiar with the situation. Geely then submitted a bid for Saab, the people said.

Eric Geers, a Saab spokesman, said Saab invited ten possible buyers to travel separately to Trollhattan, Sweden over the past several weeks to show them Saab’s facilities and meet executives. He said the ten included a "mix of investors and auto makers," but he declined to confirm that Geely was one of them, or to say how many of the ten candidates turned in offers. He said GM and Saab hope to choose a buyer by "early summer."

Details of Geely’s bid couldn’t immediately be determined. A spokesman declined to comment.

Mr. Geers said if an auto maker or an investor is bidding for Saab to shift its production out of Sweden, that might not bode well with the Swedish government, which Mr. Geers said is moving to provide loan guarantees to bail Saab out of its financial trouble.

A source familiar with Geely’s thinking told The Wall Street Journal earlier this year if its planned bid for Volvo were to succeed, Geely might shift some of Volvo’s production to China to take advantage of China’s less-expensive labor and reap other benefits.

The bid for Saab, especially while Geely is also pursuing Volvo, could be risky for the relatively small Chinese company. Saab has been mostly unprofitable since GM invested in the brand in 1990, and GM said late last year it planned to sell Saab as part of its turnaround efforts. In February, Saab filed to reorganize under court protection in Sweden, a process similar to Chapter 11 bankruptcy protection in the U.S.

In addition to Renault, GM is in talks about Saturn with Detroit auto titan Roger Penske, who could eventually be part of a Renault agreement or a separate deal with another auto maker.

Mr. Penske is one of the world’s largest auto dealers through his ownership of Penske Auto Group. He also owns a logistics company and has a major presence in auto racing.

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John D. Stoll at

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