Posted on 07/05/2006 7:39:54 PM PDT by Flavius
DETROIT - Billionaire investor Kirk Kerkorian could seize control of General Motors Corp. easily with help from automakers Nissan and Renault. ADVERTISEMENT
Kerkorian's Tracinda Corp. owns 9.9 percent of GM's shares. If Renault SA of France and Nissan Motor Co. of Japan each buy stakes of up to 10 percent, they collectively would be the largest shareholder and could have their way with the icon of American industry, analysts said on Wednesday.
With such control, the disgruntled Kerkorian could oust GM Chairman and CEO Rick Wagoner and replace him with Carlos Ghosn, the chief executive of both Renault and Nissan.
"It's certainly within the realm of possibility," said Pete Hastings, an auto industry corporate bonds analyst with Morgan Keegan & Co. Inc. in Memphis, Tenn.
Ghosn and Kerkorian have discussed the possibility of Renault and Nissan buying a minority stake in GM and forming an alliance with the nation's largest automaker, which is battling rising costs, fierce competition from Asian automakers and shrinking sales in the U.S. Ghosn gained a reputation as a strict cost cutter while leading the revival of Nissan.
GM is a closely held company, with six entities controlling more than 60 percent of its common stock, making it relatively easy to collect 30 percent or 32 percent of the shares, said Gerald Meyers, the former chairman of American Motors Corp. who now teaches at the University of Michigan. With about one-third of the shares, no one else would be large enough to stand in the way, Meyers said.
"Everybody else is a little guy, and when you talk, everybody else listens," he said. "To fight off somebody that's that large, relatively speaking, you have to go out on a broad front and persuade the little shareholders that you're right and they're wrong. That takes a lot of effort, a lot of time and a lot of money."
Hastings and Meyers said it's likely other institutional shareholders will join Kerkorian, giving him control of GM with only a minority investment.
"If those institutions get anxious, they can all vote the same way, and then it's curtains for anybody who's in opposition," Meyers said.
Carrie Bloom, a spokeswoman for Kerkorian, would say only that Nissan and Renault are interested in purchasing a minority interest in GM. She would not comment when asked about replacing management or taking control of the company.
Spokesmen for GM's two largest minority shareholders, State Street Bank and Trust Co. of Boston and Capital Research and Management Co. of Los Angeles, said they could not comment on whether they would join Kerkorian. Messages were left with the other three entities that own more than 5 percent of GM's common stock.
David Healy, an industry analyst with New York-based Burnham Securities Inc., said Kerkorian is merely using news of the potential alliance to push up GM's stock price. He called the prospect of taking control of the company preposterous but cautioned that GM still must pay attention to Kerkorian because of his success as a corporate raider and because he has a representative, Jerome York, on GM's board.
John Chevedden, of Redondo Beach, Calif., whose family owns about 2,000 shares of GM stock, said he would welcome Wagoner's removal because of the company's "dismal performance."
He said Ghosn would be great but questioned whether he would have the time to run Nissan, Renault and GM.
Healy called Ghosn a miracle worker who rescued Nissan from the grave after it was acquired by Renault. Ghosn, he said, has done it all at Renault and Nissan and is getting bored and "looking for new fields to conquer."
"He's one of the few that's actually executed a turnaround after an acquisition," Meyers said of Ghosn. "That's a very hard commodity to come by."
GM said Wednesday that its board of directors will meet by telephone Friday, a week after Kerkorian disclosed his efforts to form the alliance with Renault and Nissan.
Spokeswoman Toni Simonetti said the meeting was scheduled before Kerkorian proposed the three-way alliance, but she would not disclose what was on the agenda.
The board met by teleconference last week to discuss Kerkorian's proposal, and the company issued a statement saying that members would take the plan under advisement.
Normally the board meets the first week of every month, but it recently has been talking more frequently, Simonetti said.
"In addition to its regularly scheduled meetings, the board recently has been convening a little more regularly by teleconference to just stay up to date on the progress of the turnaround strategy and such," she said.
GM, the nation's largest automaker, lost $10.6 billion last year but made a $445 million profit in the first quarter of 2006.
Simonetti said GM has made great strides in recent months, with expense savings from 35,000 hourly workers taking early retirements and buyouts, an agreement on health care cost concessions with the United Auto Workers and freezes in health care and pension benefits for salaried workers and executives.
The company also has new models coming out that should boost sales in the second half of the year, she said.
"I think Rick Wagoner had formulated a turnaround strategy, and we in the past year have successfully implemented a significant share of that turnaround plan," Simonetti said.
GM shares rose 1 cent Wednesday to close at $29.42 on the New York Stock Exchange
Kirk Kerkorian is, according to the sources, 87 years of age. Whatever it is he has planned to do he'd best do it fast ~ before he forgets it for one thing ~ and so he can enjoy it a couple of years.
GM's interests haven't been America's interests for a very long time. Who cares how this ends.
its overblown - their pension problem will be solved as the retirees die off. yes, it will take time, but it will happen.
if this deal goes through - GM is gone.
nonsense. they are a great american company - a company that actually makes things, as opposed to companies that just provide services, or retail sales, or swap bonds another paper assets. they are a company that provide lots of good middle class private sector jobs for american workers.
The French are really going to have the corner on the automobile business - they already own B.F. Goodrich and Uniroyal as well as Michelin, control "Car and Driver" and "Road and Track" magazines, and just for good measure, have majority interest in Motel6......
yet their cars are c.p and with gm in the mix, toyota should take over the world
Billy Durant. GM was founded by a gambler. Got thrown off the board, started an independent automaker named after a Frenchman (Chevrolet) and used that company to leverage his way back into GM.
In my opinion, the best outcome for the US, GM and the auto industry as a whole is a chapter 11 Bk, reorganization, stop returning phone calls from the unions and start building cars.
well i would just add one thing , remove all the people responsible for current car designs
all of them
Being a GM employee at the blue collar level pays far better than even French welfare.
yes now it does, but once they 'streamline' that so it looks more like an mexican ran operation that french welfare will be a dream
GM, as mucked up as it is, remains an industrial powerhouse. Just needs to relieve itself of pensions, healthcare and lifetime union wages.
The pension problem is overblown, IMO - the health care problem is not. Underfunded health care benefits for retirees dwarf the pension underfunding at GM and Ford (think 3 to 1). The pension underfunding could be solved overnight as both companies have more than enough cash on hand to eliminate the underfunding (though that might create other cash flow problems). Heck, last year Ford eliminated quite a large chunk of their underfunding even while losing money. And that's not counting pension changes pushed through this year which reduce future benefits (ie, make the gap smaller). Exxon made a fortune and hardly put a dent in theirs.
Actually Louis Chevrolet was Swiss.
And he is buried in a Catholic cemetary here in Indianapolis.
I believe the GM PENSION is overfunded.
OPEB is a whole other story though
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