GM will explore foreign alliance
DETROIT — With its arms twisted by disgruntled shareholder Kirk Kerkorian, the General Motors Corp. board decided Friday to have management look into linking the world’s largest automaker with Renault SA and Nissan Motor Co.
Experts say GM really had no choice.
Had it balked at Kerkorian’s proposal to study a three-way alliance, it likely would have been sued by Kerkorian or others for breaching its duty to stockholders.
Kerkorian, whose Tracinda Corp. owns 9.9 percent of GM’s common stock, has been unhappy with the pace of GM’s turnaround efforts.
Tracinda said in a statement that it was pleased with GM’s action, but an objective evaluation would require a board committee “that receives independent financial and legal advice.”
Meeting by teleconference, the GM board decided that Chairman and Chief Executive Rick Wagoner should lead the talks. Wagoner already had arranged a meeting with Carlos Ghosn, CEO of both Nissan and Renault, which likely will take place in the Detroit area on July 14.
GM’s management will “weigh the potential benefits of such an alliance in order to assist the board in its decision making,” board member George Fisher said in a statement.
Wagoner said GM has experience with different alliances, some of which have benefited GM.
“We will enter into discussions with the managements of Renault and Nissan with an open mind — eager to hear their ideas of how an alliance between our companies might work to our mutual benefit,” Wagoner said. “Given the complexity of any potential relationship, it has to be carefully considered on its merits before coming to any conclusion.”
Nissan and Renault both issued statements saying that they look forward to starting the talks soon. Their boards previously expressed interest in the alliance.
GM shares rose 28 cents, or just under 1 percent, to $29.48 on the New York Stock Exchange. They have been trading in a 52-week range of $18.33 to $37.70.
“We periodically receive interesting proposals, and we owe it to the company and its shareholders to explore how they might work, and to objectively weigh the potential benefits and issues that each might present,” Wagoner said.
Fisher, retired chairman and CEO of Eastman Kodak Co., said the board will monitor the talks and make sure they serve the best interest of all GM stockholders.
Gerald Meyers, the former chairman of American Motors Corp. who now teaches at the University of Michigan, said Kerkorian left the GM board with no other options.
“Due diligence — that’s the magic term,” he said. “It’s required, or else they are subject to shareholder suits.”
Meyers said the board was right not to go any further than it did. Jumping into an alliance would only distract from GM’s turnaround plan at this point, he said.
“It puts it off to the side … and lets them go ahead and do the large work, which is save themselves,” Meyers said.
The board would have responded in the same manner even in the case of a hostile takeover attempt, said Peter Henning, a Wayne State University Law School professor and former attorney with the Securities and Exchange Commission.
“They don’t have to agree to this, and they could even come back with a counterproposal, but there’s no requirement that they have to respond with anything more than `We studied it and we don’t consider it best for the company,”’ Henning said.