Following up on Gordon’s post on this issue, GM’s board has agreed to authorize talks with Renault and Nissan about the possibility of a three-way alliance. If you recall, GM’s biggest shareholder, Kirk Kerkorian, sent letters about a week ago requesting that such discussions take place and asking GM to set up a board committee to examine proposals related to a potential alliance. GM’s statement announcing their plans did not mention Kerkorian’s request, but it seems to have had an impact. Indeed, the New York Times characterized GM’s move as “bowing” to the request of its biggest shareholder. I have to ask, is this the new face of shareholder activism or just an outlier?
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1. Posted by Auto on July 7, 2006 @ 17:04 | Permalink
I say PR move. Management wants to maintain the high moral ground that it is exploring all options. But nothing will come of it.
And with good reason. Any tie-up with Nissan or Renault does nothing to solve GM's immediate problem that it is bleeding cash due to legacy costs while losing market share.
And a tie-up with Renault? Good grief -- why?
2. Posted by jake on July 7, 2006 @ 17:09 | Permalink
The $64,000 question:
Why is Ghosn even remotely interested in jumping into the GM briar patch?
3. Posted by Jeff Lipshaw on July 9, 2006 @ 10:45 | Permalink
It's really the old face of shareholder activism that, for better or worse, had something to do with the performance of the company. It's in the tradition of takeover people like Sam Heymann or Carl Icahn or Saul Steinberg or Ross Perot (in the case of GM) or Kerkorian himself (when he made his earlier play for Chrysler) who maintain or acquire a substantial stake in the company and have no outcome in mind other than a return qua shareholder (granted, whether that is only the "raider" as shareholder in the greenmail instances, or all shareholders). I would call these the "money activists."
That is to be distinguished from Rule 14a-8 shareholder activism on issues like classified boards or poison pills, where the "activist" holds a limited number of shares, and seeks to affect the governance practices of the corporation, either because in theory the practice has some correlation to value (takeover defenses) or for political, including wealth redistribution, reasons (the activities of union pension funds). I would call these the "paper activists."
While both Kerkorian and Professor Bebchuk are activists, I'm not sure that there is any relationship between money and paper activists other than one of the theoretical goals of the paper activists is to make it easier for the money activists to maximize shareholder through the market for control.
So to equate how GM reacts to Kerkorian with how it might react to a shareholder proposal is apples and oranges (yes, they are both fruit).