Bowing to a request by its biggest shareholder, Kirk Kerkorian, the board of General Motors directed its chief executive, G. Richard Wagoner Jr., yesterday to begin "exploratory talks" with Renault and Nissan on a potentially historic three-way alliance.
The board's decision to put Wagoner in charge of the discussions, rather than a board committee as Kerkorian had urged, represented a strong show of support by the directors for the embattled chief executive.
The board also reiterated its backing of the turnaround strategy of Wagoner, who serves as the board's chairman.
The move by GM to approve the talks was expected, since the board risked angering many shareholders by dismissing the discussions out of hand.
Kerkorian, who owns a stake in GM worth 9.9 percent, had requested that GM discuss an alliance with Renault SA and Nissan Motor Co., and the chief executive who runs both companies, Carlos Ghosn. Kerkorian, through his associates, has expressed frustration with the pace of GM's revamping.
Although GM agreed to his main request, Kerkorian was not satisfied. A statement yesterday from Kerkorian's company, Tracinda Corp., read in part: "A full and objective evaluation of this unique opportunity will require establishment of a board committee that receives independent financial and legal advice."
The talks will begin quickly: Ghosn and Wagoner are scheduled to meet Friday in Detroit, during Ghosn's visit to Nissan's North American technical center.
Many analysts consider Ghosn a prime candidate to replace Wagoner if an alliance were to be formed - something that is nowhere near certain, given the complexity of such a deal.
But with Wagoner leading GM's side in the talks, there seems virtually no chance of a deal that would lead to a takeover of Wagoner's job by Ghosn.
"It's pretty tough for most people to fire themselves," said John P. Kotter, a professor of leadership at Harvard Business School and the author of several books on organizational change.
Shares of GM rose 28 cents, to close at $29.48 in trading on the New York Stock Exchange.
A senior executive at a competing auto company, who is familiar with the operations of all three companies, said Wagoner and GM directors had clearly stood their ground. "Putting Wagoner in charge of the thing? That's a strong signal to Kerkorian that you aren't going to push around Wagoner on this one," the executive said.
The focus now turns to the talks and whether Kerkorian will become impatient with their pace, or displeased with the outcome.
He is not known for backing off from his demands - particularly in his past automotive dealings, most famously at Chrysler Corp. in 1995. He was Chrysler's largest shareholder at the time, and he had floated a leveraged buyout plan called Project Beta to senior company executives, according to the book Taken For A Ride by Bill Vlasic and Bradley A. Stertz.
Chrysler managers rebuffed the effort, and soon after, Kerkorian began a hostile takeover attempt for Chrysler, backed by its former chief executive, Lee A. Iacocca. The effort was ultimately unsuccessful, but he gained a representative on the board of Chrysler, which doubled a stock buyback plan at Kerkorian's urging.
The GM board was trying to appease both sides, said Kotter, the Harvard professor. Though it came down firmly in support of Wagoner, the board also is leaving its options open should Ghosn have some valid ideas.
Board members "don't want to go down in history having sat on the bow of the ship as it sank into the water," Kotter said.
Wagoner, in the company's statement, said GM management would approach the discussions "with an open mind - eager to hear their ideas of how an alliance between our companies might work to our mutual benefit."
George M.C. Fisher, the former Eastman Kodak Co. chief executive who serves as GM's lead outside director, said in the statement: "The GM Board of Directors authorized management to proceed with its plan to consider ideas the other two companies have and to weigh the potential benefits of such an alliance in order to assist the board in its decision making."
Yesterday, Wagoner said management was committed to a "thorough and objective review" of an alliance.
"General Motors has a lot of experience with different types of alliances, and some have provided significant benefits to GM's competitive position and financial strength," he said.
GM, in fact, has a mixed record in its linkups with other companies. It has a long association with Japan's biggest auto company, Toyota Motor Corp., with which it builds cars in a joint venture in California. But GM's association with one of Europe's biggest carmakers, Fiat SpA, ended badly, forcing GM to pay $2 billion to extricate itself.
While it promotes the success of its venture with Korea's Daewoo, GM recently ended ventures with two Japanese companies, Fuji Heavy Industries, the parent of Subaru, and Suzuki. The talks between Wagoner and Ghosn could include linking their engineering, product development and manufacturing operations.