GM’s possible alliance

When I heard about Kirk Kerkorian’s “emergency” proposal for a global alliance between GM and the Renault-Nissan Group last week, I was shocked, which is exactly the reason I’m writing this post days later.

Shocked that the idea had made the news as more than just a far-fetched idea of Kerkorian’s, and shocked again when GM’s Board gave Rick Wagoner the go-ahead to talk the proposal over with Kerkorian (of course, that was only after Kerkorian decided that since he wasn’t getting the meeting he wanted quickly enough, he was going to undermine Wagoner and GM and back them into a corner by giving a copy of the letter to the press).

I’ve read countless articles over the past few days about the proposal, each speculating on the possible outcomes of an alliance with Renault-Nissan.

An article in Sunday’s online edition of the Freep said that GM is just “playing the game” so to speak, and is letting Kerkorian showcase his proposal, but, in the end, GM plans to politely decline it. I’m in the business field, so I can understand this – not wanting to anger a major stakeholder and not wanting to burn bridges. However, when I hear talk about Carlos Ghosn swooping in to “fix” GM, I start to get nervous. I guess it’s just something about resting the fate of a huge company on one man’s shoulders that worries me a bit.

Sure, Ghosn did a good job turning Nissan around, but GM is a totally different kind of beast. Besides, how many CEO positions can one man have? Seriously, though, I know GM isn’t perfect and that it has some cost-cutting to do. I also don’t know how I feel about Wagoner as CEO; is there a better person out there for the job? Probably. Is it Carlos Ghosn? I just don’t know, but I don’t think it’s something that should be forced upon anybody or decided upon quickly, especially when it’s done in the shady way that Kerkorian did it. This is not something to take lightly; GM is the world’s largest automaker, for pete’s sake; a company that was founded in 1908 and not only has its world headquarters in Detroit, it is Detroit.

I would love to hear from anyone in the auto industry about this matter – what is the environment like at GM right now? Are you for or against the proposed alliance?

2 Comments so far

  1. Tom (unregistered) on July 13th, 2006 @ 8:37 am

    Well, I don’t directly work for the auto industry, but here in Detroit almost everyone has a job that somehow intertwines with the auto industry.

    The truth is that GM is in a lot of trouble. Things have continually gone downhill for them the past 20-30 years. They may have a good quarter here and then, but realistically GM has to make some major changes to stay afloat. They have TONS of legacy costs to employees who worked for them during better times, that they have a moral obligation to uphold.

    Something has to change at GM. Kerkorian is at least putting something on the table for the GM execs to throw around. If nothing else, he’s planting the idea in their heads, the media, and the people that GM is going to have to make some big and drastic changes to deal with the challenges it faces that other automakers do not.

  2. Girl in the D (unregistered) on July 13th, 2006 @ 3:16 pm

    I agree that GM has been on a downward slide and that it needs to make major changes and cut the fat. Part of it stems from being an old, established company (think Boston-Matrix). Part of it is GM’s own fault. Its pension debts remind me of the Social Security conundrum. It needs to stop offering pensions to new workers. It also needs a major overhaul of its health care benefits. It is important to remember, though, that GM is still the world’s top automaker in terms of sales. Its in trouble, but GM is not going bankrupt anytime soon. Don’t forget its bright spot, either; getting into China first was one of the best things GM has ever done. The Chinese market could restore GM’s strength all by itself if the company keeps doing what it’s doing there. Toyota and Honda are way behind in this market. GM is also doing well in Europe.

    I just don’t see how the proposed alliance isn’t going to make things more complicated. Nissan had a nice turn-around from red to black, but its sales are now slowing in Japan. Financially, Renault-Nissan is better off than GM right now, but, it isn’t number one, either, and both Nissan and Renault still have their own problems. Merging three companies that are currently each performing at an average grade doesn’t produce a superstar.

    As far as Kirk Kerkorian is concerned, the man has lost hundreds of thousands of dollars in GM stock, and he hates losing money. He got into GM stock for the money and he’ll do whatever it takes to make that money back. Even if it means clobbering GM in the process.

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