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Renault, Geely in Talks with GM

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[source: Wall Street Journal]

Renault, Geely Consider Deals for GM Units

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.

Meanwhile, Geely Automobile Holdings Ltd. has submitted a bid to acquire GM's Saab unit, people familiar with the situation said.

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 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.

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 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.

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.

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.

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

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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Awesome. Here's a Saturn I would be interested in buying...

A Corvette?


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