General Motors Death Watch 93: Detroit Death Match

Robert Farago
by Robert Farago

Yesterday, Automotive News reported that octogenarian GM investor Kirk Kerkorian is "frustrated with CEO Rick Wagoner's lack of enthusiasm for an alliance with Nissan-Renault." That's like the DEA saying it's frustrated with Bolivia's inability to curtail its cocaine exports. Kirk knows that Rick would sooner pull the ripcord on his [bankruptcy proof] golden parachute than green light a hook-up with the French. Which is why the Lion of Las Vegas responded to Wagoner’s “no deal” comments to the Parisian press by threatening to buy up even more shares in the ailing automaker: to force Wagoner into a corner.

We now know that the Nissan negotiations began after GM Board Member and Captain Kirk crony Jerry York held a secret meeting with Nissan boss Carlos The Jackal Ghosn. Forget strategic alliances and supplier synergies; York simply offered Ghosn Wagoner’s job. Setting aside the outrageous not-to-say-criminal impropriety of a GM Board Member launching a clandestine plot against his company’s Chief Executive Office on behalf of an outside investor, the play finally reveals the intent behind the whole lawyer-enriching GM-Nissan mishegos: to remove Wagoner from the helm of the world’s largest automaker. Period.

If you recall, Wagoner fended-off the initial attack by convincing his boardlings to put him in charge of analyzing the potential of the proposed GM-Nissan-Renault alliance (much like a Bolivian drug lord electing himself president to police drug traffic). At the Paris auto show, Rabid Rick did the pro forma meeting thing with Carlos, announced (again) that GM’s turnaround is on track thank you very much, and then, outrageously and ominously (considering GM’s cash position), suggested Nissan should put a couple of bil on the table. Kirk immediately threatened to buy 12 million more GM shares. Message to Wagoner: don’t fuck with me.

Captain Kirk holds 56 million shares or 9.9 percent of GM’s common stock. He bought the shares at an average price of $31.50. At Thursday’s $33.06 per share closing price, Mr. Kerkorian’s paper profit currently stands at $84m. Upping his stake by 12m shares would cost The Lion of Las Vegas a relatively paltry $400m. The purchase would put his total GM investment at well over 10% or roughly $2.25b. Should he make the move, the additional shares would give Kirk more clout to demand an “independent financial review” of the GM-Nissan-Renault deal. To that end, he’s informed the Securities and Exchange Commission that he wants to change his official status from a passive (!) to an “active” investor.

Obviously, there’s no good reason for Kirk (or anyone else) to buy a chunk of GM based on its long-term future. Despite Red Ink Rick’s steadfast claims that his turnaround plan is kicking in now… no wait… now… oh hang on… NOW, GM’s death spiral continues. Kirk’s inside man Jerry York knows that GM’s new pickups aren’t going to pickup enough business to save the company’s bacon. He knows that GM’s summer of deadbeat love, the company’s increased incentives on products both old and new, their aggressive “book the deal when it leaves the factory” accounting and the negative effect of this fall’s heavily curtailed future production all spell disaster.

York and Kerkorian are also aware that the domestic automobile market is only getting more competitive. The so-called imports make stacks of money in the US because their domestic counterparts are high cost producers who set a floor on pricing. It’s an open secret that Toyota, Honda, Nissan, Hyundai et al. could bury GM/Ford/DCX simply by lowering the prices on their vehicles. Toyota’s new Tundra is a step in that direction that’s bound to show that none of The Big Two Point Five’s products are safe from non-union competition.

All of which tell/reminds us that Kirk’s in it for the money. Hence Kirk’s decision to put Wagoner in a classic you’re fired if you do (hello Carlos!) and you’re fired if you don’t (where’s Carlos?) position. Once Captain Kirk replaces Wagoner, especially if it’s with The Jackal, GM’s stock price will rise. Kirk will cash out and that’ll be that– for Kirk. The General will still be in chaos. Whether or not the Jackal could then recreate The General as a profitable car company– without taking it into Chapter 11– is an open question we may yet see answered.

Things will get ugly if Kerkorian doesn’t get his way. For one thing, GM will have to show good financial results– even if they’re less credible than last quarter’s. GM’s accounting department has been sailing close to the wind for well over a year now. Federal regulators may flex their muscles post-November elections, perhaps aided by Jerry York (providing yet another way to axe Wagoner). In fact, this whole Kirk – Rick thing has become a Detroit death match. Anyone betting on Wagoner better hope that GM’s octogenarian investor forgets to take his medicine, or dies in the arms of Anna Nicole Smith.

Robert Farago
Robert Farago

More by Robert Farago

Comments
Join the conversation
2 of 23 comments
  • Ed S. Ed S. on Oct 03, 2006
    To those who think GM doesn’t want to build a car that is viagra on wheels: Poppycock! (I always wanted to use that word). -Dr. No Of course GM wants another one hit wonder. What they are unwilling to do is to put nose to gridstone day in and day out for decade after decade in the pursuit of perfection in what ever market space they deam profitable. That's the problem. If Rick was in it for the money, he’d have left years ago (because his job sucks and he already has enough to retire). -mdanda You completely misunderstand the symptoms of the affliction of Egomania. It does not allow one's self to do what is easy, expeditious, or righteous if doing so means admitting one's own shortcomings. Ricky is still CEO cause he thinks he's right and thinks he the best guy for the job. His blinders are the bestest!
  • ThriftyTechie ThriftyTechie on Oct 03, 2006

    Yikes. Those September GM sales numbers look pretty bad. Toyota's are great. Moving Forward indeed.

  • Yuda Power grid is already failing with the few chargers there are This is just gonna make things worse for normal people
  • Yuda EVs in general are a scam LMAO I'm not surprised
  • Lou_BC "In 2007, 85% of Americans drove themselves to work and 6% rode with someone else. But by 2018, while the 6% of Americans who carpool has remained constant, there has been a decrease in the percentage of those who drive themselves to work, edging down to 77%." .................. If people can't recharge at home, it would be logical to set up charging infrastructure at workplace parking lots. That would cover 77% of the population. An 8 hour workday should be adequate to keep an EV charged.
  • Jeff Dirty Harry with the blue Ford Custom 500.   "I know what you're thinking, punk. You're thinking "Did he fire six shots or only five?" Now to tell you the truth, I've forgotten myself in all this excitement. But being this is a .44 Magnum, the most powerful handgun in the world and will blow your head clean off, you've gotta ask yourself a question: "Do I feel lucky?" Well, do ya, punk?"
  • Picard234 You mean you built a time machine....out of a DeLorean!?
Next