Thursday, July 13, 2006

Politicians worry deal will hurt state

Friday, July 07, 2006
Daniel Howes
Daniel Howes: Politicians worry deal will hurt state

General Motors Corp. insiders aren't the only ones studying whether a tie-up with Carlos Ghosn's Franco-Japanese alliance of Renault-Nissan makes sense for America's largest automaker.

From Gov. Jennifer Granholm to the most influential members of Michigan's congressional delegation, questions are being raised about what -- if anything -- GM would get from joining Ghosn's 7-year-old alliance and what it might mean for Michigan's tepid job growth and anemic economy.

"Our history has been what is good for GM is good for Michigan," Granholm told me Thursday. "This is serious business. This is our major employer. Show me this is good for Michigan. Show me this won't send jobs to France or Japan. Show me how this helps us and I'll be on board."

If it ever comes to that.

Officially, GM isn't yet lobbying key lawmakers on the blockbuster tie-up proposed by Las Vegas billionaire Kirk Kerkorian, whose Tracinda Corp. owns 9.9 percent of GM. At a minimum, they're waiting until GM's board meets today and charts a response that is expected to include a plan to study Kerkorian's proposal.

"Are people going to be unhappy about General Motors being sold or sold off? Absolutely," U.S. Rep. John Dingell, D-Dearborn, said. "Everybody's got to tread very, very carefully here. If it breaks the wrong way, we will be" prepared to push back. "But at this point in time, we don't know."

Ranking politicians privately say GM, in response to inquiries from lawmakers, is using back channels to warn that a tie-up like this could derail GM's North American turnaround should the three companies try to develop common purchasing and product development systems.

That wouldn't be good for Michigan, for those who survived GM's cuts to its salaried work force or the historic buyout that will eliminate 35,000 union jobs. And it wouldn't be good for an independent, American-owned auto industry, whose two remaining players -- GM and Ford Motor Co. -- are struggling to book profits building cars and trucks at home.

"The future of the domestic auto industry rides with this," said U.S. Rep. Joe Knollenberg, R-Bloomfield Hills. "There would be some concern (in Congress) about grouping these entities together and what it would do to the face of General Motors and the face of the American domestic industry."

It may be too early to draw political battle lines, but Kerkorian's proposed tie-up carries potentially profound implications in a post-September 11 Washington that has shown growing, if occasionally misguided, hostility to foreign investment in American assets.

How would Congress regard the French government, which still controls 15 percent of Renault SA, owning a piece of GM?

What about Japan's Nissan Motor Co. holding a stake in GM? Combined with the shares of Renault and Kerkorian, two foreign rivals and a mercurial mogul effectively would control a pre-eminent, if troubled, American icon.

Would Nissan's record of operating nonunion plants in the United States cause the beleaguered United Auto Workers to lobby Congress and GM to oppose Kerkorian -- a UAW nemesis?

How would Granholm, who has made foreign automotive investment a cornerstone of her economic strategy, square the Renault-Nissan play with her desire to safeguard Michigan jobs?

As much as Kerkorian and his deputy, GM director Jerry York, may portray their gambit as all about "enhancing shareholder value," the harsh reality is that it's also about domestic and international politics.

Granholm is running for re-election this fall and needs strong union support to beat back a challenge from Republican Dick DeVos. Coalescing lots of Michiganians against foreign automakers and a Vegas carpetbagger would score easy political points.

And early indications from Paris and Tokyo suggest neither French nor Japanese political leaders, facing serious global hot spots in North Korea and the Middle East, relish the prospect of antagonizing some in Congress just so Kerkorian can scratch another automotive itch and give Carlos Ghosn a bigger stage.

"I do come away from this saying this is not good for us," a Republican member of Congress told me. "There's no doubt (GM) is trying to prime me against it. I would be for it if it opened new markets for GM."

That's not at all certain, with the arguable expectation of Japan.

It's only been a week since Kerkorian's Tracinda revealed its intentions in government filings, but public sentiment in all three countries -- of analysts, the media and the capital markets -- is raising serious questions about the proposed tie-up.

None of this would have happened -- not the 24-7 global news frenzy, not the market scrutiny, not the politicians weighing the fallout -- had Kerkorian and York kept their discussions quiet, as most dealmakers usually do to keep control of the message.

But that's not Kerkorian. He wanted to send Wagoner a message. He used the global business media, turbo-charged by the Internet, to dramatically increase pressure on GM and to publicly signal his preference for Ghosn at GM.

Too many have seen Kerkorian's tactics before. Wall Street smells a "drive-up-the-stock-to-get-out" play. Industry insiders see Ghosn angling for cheap GM assets that can help him out of a fix (Nissan's U.S. market share slide this year is second only to GM's). Politicians describe Kerkorian as a "villain" and "mischief maker."

GM remains a troubled company. It lost $10.6 billion last year, is burning cash and losing market share. But Kerkorian's tactics are no secret, either, which is why a lot of people aren't necessarily buying what he and York are selling.

Daniel Howes' column appears Mondays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or Catch him Fridays with Paul W. Smith on NewsTalk 760-WJR.

© Copyright 2006 The Detroit News. All rights reserved.


Post a Comment

<< Home