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Saturday, July 08, 2006

 

GM Merger Thoughts

The airwaves in Detroit have been buzzing with the GM/Renault/Nissan merger discussions. There are at least two camps:

1. The, "don't distract us while we're fixing GM" camp
2. The, "let Carlos Ghosn loose on GM's problems" camp

I listened to an interview of Mr. Meyer, former Chairman of American Motors yesterday, on WJR760. He opined that the merger discussion were coming at the worst possible time for the GM team. "It is a distraction from the task at hand."

My view is the opposite. Perhaps a distraction is needed? GM has lost market share equal to all of Toyota's sales in the U.S. market. If GM management team had managed the company properly (with no distractions mind you), there wouldn't be a merger discussion.

Anyone watching Kerkorian buy GM shares had to know that he wasn't investing because he wanted a discount on his next Cadillac. No, Mr. Kerkorian has a reputation for acquiring shares and then demanding value enhancement. My guess (and only a guess) is that he's watched his GM shares flounder and recognized the value of the assets under stronger leadership. He sees Mr. Ghosn as a better leader than Mr. Wagoner, given his turnaround record. Mr. Ghosn has already brought Nissan back from the brink with aggressive cost cutting and stylish new models. Nissan is healthier and share has increased. The same can't be said for GM. So, here's betting that Mr. Kerkorian and Jerry York prefer Ghosn's leadership over that of Rick Wagoner.

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