General Motors Death Watch 84: Going, Going, Ghosn
After carefully considering the potential benefits of a GM – Nissan – Renault alliance, auto industry analysts have concluded that the deal makes about as much sense as Finnegan’s Wake. Well duh. Anyone even vaguely familiar with GM’s current crisis knows there’s only one thing the General needs right now: vehicles that people want to buy, at a price that makes the company a profit. This they don’t have. And guess what? Nissan – Renault can't give it to them. Even if Nissan and GM and Renault could work together (a completely preposterous concept), you’d see a second gen Chevrolet Camaro long before you’d see a hit product. No, there’s something else in play here…
To understand why this weird-ass multinational deal has progressed to the point where GM CEO Rabid Rick Wagoner and Nissan – Renault boss Carlos “The Jackal” Ghosn are headed for a Bastille Day chin wag, it's important not to "over think" it. The main players' motivations run the gamut from self-preservation all the way to greed, and back. To wit: the whole thing was started by a man who's lost a billion dollars on GM's shares. I don't know about you, but if I'd dropped a bil on a bunch of losers who refuse to institute radical change or even set targets towards profitability, I'd want to A) protect my investment from Chapter 11 and B) kick some ass.
From that perspective, convincing Nissan – Renault to buy up 20% of GM’s stock makes perfect sense. TTAC’s sources reveal that GM’s cash position is slipping well below $10b every month– perilously close to the $5b pad it needs to stay in business. Inventories are still up, and sales are still down. Kerkorian’s game of footsie with the foreigners would add $3b to GM’s kitty. That could be enough money to keep GM afloat until the end of the year, when cash from the sale of its GMAC finance unit finally arrives. At that point, GM would enter another one of those endlessly reoccurring “false dawns.” Kirkorian could sell off his stock at a profit and die in peace.
Analysts don’t see cash as a factor. They believe Kirk’s play was designed to replace Rabid Rick with the Jackal. It's an equally plausible scenario. Despite the fact that Rabid Rick's administration has been an unmitigated disaster, GM's CEO has displayed a unique talent for self-preservation. His message– slim the structure, stay the course– appeals to all of those GM's constituencies who have a vested interest in maintaining the status quo. Which is, of course, everyone other than Kirk Kerkorian.
To remove Wagoner, Kirk had to offer The Powers That Be a suitable alternative. You want a turnaround? Let's hire the only man on planet Earth who's already done the deed. The stock market responded to the possibility of Monsieur Cost Cutter taking the reins at GM with predictable enthusiasm. GM's Board of Bystanders reacted with equal predictability. After a due diligence conference call with Nissan – Renault execs, GM’s conclave of corporate co-conspirators charged Rick Wagoner with the task of further exploring a GM – Nissan – Renault alliance. The appointment assured a less than positive recommendation on the plan and a competitive entry in The Most Bizarre Business Meeting of the Year award.
GM’s Board quite rightly perceived Nissan – Renault as rapacious raiders, and sent their main man to defend GM against the barbarians at the gate. Never mind cover talk about corporate synergy. Nissan – Renault doesn't need GM's production facilities, technology, parts, platforms, dealers or office space. This is all about Carlos Ghosn desire to add another pelt to his collection. Wagoner's mob knows it, and they don't like it one bit. When Rabid Rick meets the The Jackal, one can imagine that it will be a pissing match the likes of which this industry hasn't seen since its earliest days. And then everyone will get back to work, as Kerkorian tries to find another stick that he can use to beat-up GM.
Only this deal has already inflicted tremendous damage on GM. TTAC's Deep Throat told me he took his car in for repairs over the weekend. The guy behind the counter asked if he'd heard that Nissan and Renault were buying GM. Remember when President Bush announced he wouldn't be bailing-out GM? Same thing: a clear message to America that The General is on the skids. Whether or not the Jackal replaces Rabid Rick, the mere possibility of a deal with Johnny Foreigner shakes already rocky public confidence in the world's largest automaker. The tipping point– where lowered sales makes people less likely to buy a GM product– just got closer. Like it or not, when next quarter's disastrous results are revealed, The Quiet Lion will be heard.
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My head hurts....