Friday, July 14, 2006

Analyzing GM plan will take time

Analyzing GM plan will take time
Some analysts say CEO Rick Wagoner is likely to oppose the proposed alliance
with Renault and Nissan Motor Co.
By Tom Krisher
Associated Press

DETROIT — Like it or not, the General Motors Corp. board of directors is doing the responsible thing by studying a proposed alliance with Renault SA and Nissan Motor Co., legal experts and analysts said Friday.

Gerald Meyers, the former chairman of American Motors Corp. who now teaches at the University of Michigan, said the board had no choice but to say it would consider the proposal.

"Due diligence — that's the magic term," he said. "It's required, or else they are subject to shareholder suits."

Meyers said the board was right not to go any further than it did. Jumping into an alliance would only distract from the company's turnaround plan at this point, he said.

"It puts it off to the side ... and lets them go ahead and do the large work, which is save themselves," Meyers said.

Analysts and dealers who know Chairman and Chief Executive Rick Wagoner have said that he likely is against the proposal, instead preferring to let his turnaround plan play out. Last week, the company announced that 35,000 hourly workers will retire or take buyouts, helping it to reduce production capacity and close 12 plants by 2008. It has received health care concessions from the United Auto Workers union and is coming close to resolving cost problems at Delphi Corp., GM's largest parts supplier, which the automaker spun off into a separate company in 1999.

Yet it has suffered from declining profits, high labor costs and growing competition from Asian automakers.

The talks were forced upon GM by dissident billionaire shareholder Kirk Kerkorian. His company, Tracinda Corp., issued a statement that it is pleased with the board's action.

Board member George Fisher, retired chairman and CEO of Eastman Kodak Co., said the directors will make sure the talks the best interest of GM stockholders.

David Larcker, an expert in corporate governance at the Stanford University Graduate School of Business, estimated it would take at least a year to study the proposal.

"Just the data collection exercise and the number-crunching would take a considerable amount of time," he said, adding that there are also complex legal and regulatory issues to sort through.

Copyright ©2006 Cox Ohio Publishing, Dayton, Ohio, USA. All rights reserved.


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