July 5, 2006

Alliance on the Table? Or Kirk’s Latest Fable?

Do you believe Kirk Kerkorian’s story that General Motors may join up with Renault and Nissan?

Consider:

I heard from Kirk that Susan is going to marry Edwin. Apparently Susan told Kirk that if Edwin were the last man on earth and if she needed to find a husband in 24 hours to avoid being struck by lightning, and if Edwin stopped insisting on calling himself Matt, then Susan would marry Edwin if a gun were held to her head.

So. Send out the invitations!

Kirk is a glass-half-full kind of guy. To him, “not necessarily no” is not far afield from “absolutely yes.” Close enough, anyway, to make a major announcement to the business press.

So Kirk, who owns 9.9 percent of GM, recently sent a letter to Carlos Ghosn, CEO of Nissan, asking if Nissan would like to add GM to the little global alliance it has already established with Renault.

Ghosn’s reply, issued by way of a joint statement from Renault and Nissan, was: “Such an expansion would only be considered by the Alliance if it were executed in the full spirit of the Alliance, which is founded on trust, transparency, performance and the full respect for individual corporate and brand identity." The statement added that GM’s board and management need to “fully support this project in order to start the study of this opportunity.”

He didn’t say no!

And what did GM say?

"The Tracinda request will be taken under advisement by the GM board of directors."

If that’s not a done deal, I don’t know what is.

Mr. Kerkorian owns a lot of GM, but he is only the third-largest shareholder, and Kerkorian liking an idea is a long ways away from GM’s entire board and management liking the idea. A long ways away. Not unlike the distance between the Sun and Pluto, except that light from the Sun does reach Pluto eventually – like around the time GM finishes paying all its retiree health benefits.

But where others see problems, Kirk sees solutions. Where others see multiple CEOs saying “go away, you bother me,” Kirk sees a burgeoning alliance ready to take the world by storm.

In all seriousness, GM joining forces in some measure with Renault and Nissan is not the worst idea I ever heard, at least from GM’s perspective. It couldn’t be, because GM doing things as it normally does them is about the worst idea I ever heard. And even if Kerkorian is just blowing smoke, the value of each of his shares shot up about $5 after all this became public. And he has a few shares. So either way, there’s not much downside to Kirk in telling the world about his brainstorm.

Why serious business media choose to report Kirk’s brainstorm as serious news is another question entirely. Kerkorian has many interesting ideas. He tried twice to take over Chrysler, once with erstwhile Chairman Lee Iacocca on board, because someone in Auburn Hills had forgotten that Iacocca stands for I Am Chairman Of Chrysler Corporation Always.

Kerkorian also wants GM to get rid of Hummer and Saab. After that, perhaps he will suggest creating the world’s tallest building by stacking all the Renaissance Center towers on top of each other. They might reach the moon. If they do, they will still be closer to earth that most of the trial balloons Kerkorian floats out there.

Hey. GM might be better off if they did take the guy seriously. But since they don’t, there’s no point to the business press getting too excited because he asks two parties to do something, and their response is short – just barely – of “You’re insane, man!”