Kerkorian's GM Alliance: Almost Time for a Victory Lap

Two articles in this week's Wall Street Journal, plus extensive coverage on CNBC, have laid out what Kirk Kerkorian has planned for GM. He's aiming to engineer GM's entrance into the Carlos Goshn-run alliance of Renault and Nissan.

Holman Jenkins wrote very succinctly about exactly what is going on here, in his regular weekly WSJ column. In effect, he said, Kerkorian is prepared to offer GM to Goshn, to finally get Goshn to run the place, since he couldn't lure Goshn to GM outright.

With the added talk of GM CEO Rick Wagoner's departure, should this occur, it demonstrates that there is a more serious approach to fixing GM. Wagoner is written up as the champion of a 'slow and steady' turnaround. Goshn has credentials for having actually succeeded in a rapid, well-motivated restructuring of his car company alliance. Rather than creep along with half-measures, Goshn confronted and acknowledged the severity of his situation, and moved adroitly and quickly to save his firm from collapse.

I wrote here, here, and here, back in the fall of last year, about GM's serious likelihood of losing its corporate life, and/or its independence. I see that I gave the company until the end of the decade, whereas I thought I had predicted this end within 24 months.

In either case, while it's too early to take my victory lap now, for being right, I'll get the track shoes out and begin stretching.

Reading these prior posts I have linked above, it reminds me of how much in denial the analyst media and consulting community have been about GM's and Ford's actual peril. They all seemed to worried about angering a still-spending auto giant to do their jobs and tell the truth.

Well, now they are reporting the truth, as it happens in front of them. Rather like the brokerage firms that downgrade a stock the day after it drops 20%.

You heard a warning of the fatal condition of GM here first. Having nothing to lose, it seemed easy to me to call what I saw, and reason that GM does not have long to live as an independent auto producer. Above all else, their long-running inability to design and market cars many people will pay sufficient prices for, has doomed the company. It's simply too late for them to overcome years of bad leadership and management.

Between economic uncertainty, energy prices, and competitive pressures, GM can no longer afford even one misstep. That's just too much risk for Kerkorian to take on his substantial investment. You have to hand it to the wily old guy. He has totally outsmarted the corps of analysts and media onlookers who have been clucking at Kirk's loss of touch in the GM caper.

This past week, all I hear and read about is how Kerkorian is slyly engineering a no-premium takeover, sans proxy fight and board battle. And he's even brought allies to the table that nobody had dared consider even a month ago. Talk about insight, discipline and fortitude. Kerkorian would seem to have earned every cent he's made with his bare-knuckle investing style.

If all goes well, Kerkorian will let common sense and fiduciary duty pressure the GM board into accepting his recommendation for the three-way alliance, run by Goshn. Wagoner will depart. And my prediction about GM or Ford leaving the field of independent car makers will come true way ahead of schedule.