GM Board OKs Talks on 3-Way Alliance

The directors of General Motors Corp. on Friday authorized the giant automaker to explore the feasibility of a global alliance with Nissan Motor Co. of Japan and its French partner, Renault.

GM Chairman and Chief Executive Rick Wagoner, the architect of the company’s current turnaround plan, will head the review team. He has scheduled a meeting with his counterpart at the Nissan-Renault alliance, Carlos Ghosn, reportedly for July 14.

In a statement issued shortly after a 90-minute telephone meeting Friday morning, GM’s board said it had authorized management “to consider ideas the other two companies have and to weigh the potential benefits of such an alliance.”

The statement also said the board “continues to fully support the company’s North American turnaround strategy,” developed last year by Wagoner and his colleagues.

Nissan and Renault, which holds a controlling 44% stake in its Japanese partner, said they looked forward to beginning the talks with GM soon.

But GM’s statement struck several analysts as a pro forma and unenthusiastic response to the proposal floated June 30 by investor Kirk Kerkorian. His Beverly Hills-based firm, Tracinda Corp., has proposed that Nissan and Renault take significant minority stakes in GM.

The GM board’s agreement to explore the idea was expected because directors are obliged to consider any proposal that could affect shareholders.

“They had to do this. It’s their fiduciary duty,” said John Wolkonowicz, senior auto industry analyst with Global Insight, an economic consulting firm in Lexington, Mass. “But their response is lukewarm at best.”

The board’s statement Friday specified that GM’s management would consider ideas presented by Nissan and Renault, not come up with a plan of its own for making the proposed alliance work, said Ken Elias, a partner at consulting firm Maryann Keller & Associates.

“Note that the GM statement supports Wagoner on the current restructuring effort,” he said. “I think that says a lot. Wagoner’s still their guy.”

The directors seemed to take a swipe at Kerkorian, who is in the red on the $1.69 billion he spent acquiring a 9.9% stake in GM. The board said it “will closely monitor the process to assure that its outcome serves the best interests of all GM shareholders.”

Some analysts see the alliance proposal as little more than a bid by Kerkorian to boost the stock price past his $30.24-a-share break-even point. GM shares rose 28 cents Friday to $29.48.

Kerkorian has at least one ally among GM directors: Jerome York, his longtime advisor, who was elected to the board in February at the urging of the 89-year-old mogul.

York has vowed to keep his relationship with Kerkorian separate from his board duties but still has a contract with Tracinda that guarantees him payment in 2009 of 4% of any profit the firm has made by then on its GM holdings.

It was York who approached Ghosn this year about the possible tie-up with GM, according to a person familiar with the situation who has asked for anonymity because of his insider status.

In a statement Friday, Tracinda said that although it welcomed the board’s decision, it believed that the meeting between Wagoner and Ghosn would merely be a “good first step.”

The board should establish a special committee to solicit independent financial and legal advice from outside the company, Tracinda said.

“That clearly shows that Kerkorian doesn’t think GM’s management is going to favor” joining forces with Nissan and Renault, consultant Elias said.

Wagoner was noncommittal in a statement Friday. He said he would enter discussions “with an open mind -- eager to hear their ideas of how an alliance between our companies might work.”

But he cautioned that “given the complexity of any potential relationship, it has to be carefully considered on its merits before coming to any conclusion.”

If successful, the talks -- likely to extend through the summer -- could result in Nissan and Renault each taking a 10% stake in GM.

Proponents of an alliance see all three companies benefiting from joint development of new vehicles and the use and combined purchase of common parts and components.

Some analysts and others who study the dynamics of the auto industry have expressed doubts, though, about the prospects.

Parts sharing and the cooperative engineering and design efforts necessary to make it work would take years to develop, said David Cole, director of the Center for Automotive Research in Ann Arbor, Mich.

In addition, he said, GM already appears on its way to recovering from the missteps that led to a $10.6-billion loss last year and to a long slump in its U.S. auto sales.