After months of speculation, merger talks between General Motors (NYSE:GM) and Renault-Nissan (NASDAQ:NSANY) are being sent to the scrap heap. Speculation for the failure centers most on GM's activist investor, Kirk Kerkorian, forcing an otherwise unwilling bride to the altar, which would have resulted in a shotgun wedding lacking in any matrimonial bliss. Kerkorian owns just less than 10% of GM's shares and was looking to maximize his investment quickly.
Naturally, attention will now turn to Ford (NYSE:F), another aging, ailing car spinster that's been making noises all year long about its future. The company's much-discussed -- and much-amended -- $5 billion "Way Forward" turnaround plan has not been able to gain any traction, so the storied Ford family has considered taking the company private. It's even been said that Ford and GM briefly discussed a merger. Yet as Renault-Nissan was batting its eyes at GM, it was still casting longing glances Ford's way, too.
Carlos Ghosn, head of the French car maker, had indicated Ford was its next piece of eye candy if the wedding with GM fell through, and Ford itself was reportedly receptive to the union. An alliance with Ford would appear to be a better marriage than one with GM, if for no other reason than finances.
As difficult a time as Ford has been having lately -- with sales of its previously popular SUVs and F-150 pickup trucks running off the road in the face of higher oil prices -- the company was less of a money-loser than GM. Actually, until this year, it had been making a profit. Earnings were $2 billion in 2005, though admittedly they were off from the $3.4 billion reported the year before. That all changed in the first half of 2006, however, as the company has lost more than $1.4 billion so far. GM, on the other hand, lost $10.4 billion last year, and it's racked up another $3 billion in the red for the first six months of this year.
Ford and GM, though, are not alone in feeling the pain. Daimler-Chrysler (NYSE:DCX), which began the trend of foreign car makers pairing up with American manufacturers, has also found some bumpy roads; its September sales are expected to fall 13% from a year ago. And even Renault-Nissan has not had clear sailing in its pursuit of Toyota (NYSE:TM), set to become the world's biggest automaker -- hence its willingness to make its corporate name even more of an agglomeration.
Ford would benefit from a merger through the shared purchasing efficiencies, while Renault-Nissan would get a stable of some respected name brands, including Volvo, Jaguar, Aston Martin, Land Rover, and Lincoln-Mercury. Not that they would necessarily be around long. Shedding some of these overpriced acquisitions is what many believe is required to stem the rising tide of red ink. Ford also has a plethora of idle factories that Renault-Nissan could use to churn out more cars.
Any difficulties that would arise from a Renault-Nissan-Ford merger would undoubtedly result from the Ford family being in the driver's seat. They control 40% of shareholder votes and would not easily share power, let alone relinquish it.
With the General Motors talks now up on blocks, we'll soon see whether a Ford merger gets the green light.
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Fool contributor Rich Duprey has 20 stocks in his CAPS portfolio. Think you can top his picks? Rate your own selections and get in on the fun! Rich owns shares of Ford but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
