2 Rivals Authorize G.M. Talks July 4, 2006
The boards of Nissan and Renault voted Monday to explore a historic three-way alliance with General Motors.
DETROIT, July 3 ?The boards of Nissan and Renault voted Monday to explore a historic three-way alliance with General Motors, putting pressure on the embattled automotive giant to decide whether it wants two foreign companies, and their charismatic chief executive, Carlos Ghosn, to play a role in its revamping.
Carlos Ghosn oversees both Nissan and Renault and is known for his turnaround success at the companies. An alliance of Renault, Nissan and G.M. would probably include a role for him in the revamping effort.
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G.M.’s board, which held an emergency meeting on Friday when the proposal for a deal was unveiled by its biggest shareholder, Kirk Kerkorian, is scheduled to meet this Friday, people with direct knowledge of the meeting said Monday.
G.M. did not return calls seeking comment.
The G.M. board’s decision will determine whether discussion of the alliance moves forward, since both Nissan and Renault said Monday that they would explore the venture only if G.M. went along.
The boards’ actions, taken at meetings in Tokyo and Paris, were not a surprise. After all, Mr. Ghosn, the multilingual executive of Lebanese descent who runs both companies, teamed up with Mr. Kerkorian to float the idea.
But the boards’ action lends new weight to their direct challenge to G.M.’s chief executive, Rick Wagoner. He has withstood challenges to his leadership thus far, and taken drastic action in recent months to try to turn around the company, including closing plants and offering buyouts to tens of thousands of workers. But G.M.’s board, and the company’s investors, now have a new alternative to consider besides Mr. Wagoner’s plans.
Nissan’s directors voted to begin talks “if General Motors Corporation supports and endorses the proposal made by its shareholders,” according to a statement. Likewise, the Renault board approved a resolution offered by Mr. Ghosn, which said exploratory discussions with G.M. could start if G.M. “makes the proposal.”
Mr. Kerkorian’s company, the Tracinda Corporation, said it had no comment.
Under the $3 billion plan, Renault and Nissan would each buy 10 percent stakes in G.M. Tracinda holds 9.9 percent.
The deal would put about 30 percent of G.M. in the hands of two foreign companies and Mr. Kerkorian, an unpredictable investor who has pushed Mr. Wagoner to act quicker.
Although Renault and Nissan have said they will wait for G.M.’s response, the company may have trouble making the issue go away even if it wants to. If G.M. flatly refuses to talk to Renault and Nissan, Mr. Wagoner could be cast in the light of refusing to consider Mr. Ghosn’s ideas, despite his strong track record at Nissan.
The most likely candidate to handle G.M.’s negotiations is its chief financial officer, Frederick Henderson, who ran G.M.’s European operations as well as its unit in Asia, people with knowledge of the company’s thinking said Monday night. But if G.M. enters negotiations only to stall for time, the impetus will inevitably shift back to Mr. Kerkorian, analysts said.
Until now, he has been reluctant to increase his G.M. holdings above 10 percent, because of disclosure requirements and other regulatory concerns. That could prevent him from beginning a tender offer for more G.M. shares.
But he could encourage shareholders to tender their stock to Renault or Nissan, if the companies cooperate, though their carefully worded statements indicate they may not be willing to take that action. Mr. Kerkorian also could seek out stronger partners for G.M., like Toyota, Honda or BMW, which, though independent, have entered into ventures with G.M. in the past.
Mr. Kerkorian also can keep the heat on G.M. by sending his associate, Jerome B. York, back into the spotlight to push for more change. Mr. York, who gained a seat on the G.M. board in February, made a speech in January calling for G.M. to halve its dividend and cut pay for board members and top executives, actions subsequently taken by the company.
In the most extreme case, Mr. Kerkorian could challenge the G.M. board with his own slate of directors, although a wholesale change presumably would have to wait until G.M.’s annual shareholders meeting next year.
Although G.M.’s board gave Mr. Wagoner a vote of confidence this spring when the company’s financial crisis was especially grave, Jonathan Steinmetz, Morgan Stanley’s auto analyst in New York, said the directors would have a difficult time disregarding Mr. Ghosn, given his success at Nissan.
Because of the players involved, Mr. Steinmetz said he thought some kind of partnership would come out of Mr. Kerkorian’s proposal. “It’s not just kite-flying” by Mr. Kerkorian, he said.
Mr. Kerkorian’s proposal touched a nerve in Detroit, generating front-page headlines in a type size generally used when war is declared.
On Saturday, the words “Power Play” were splashed across the top of The Detroit Free Press, over photos of Mr. Kerkorian and Mr. Wagoner.
- Posted in : GM,Uncategorized
- Author : arnold
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