Kill the Messenger - this time the LA Times

[tw]

Originally Posted by richlevy

Right now, Kirk Kerkorian and his company still want to buy GM shares, but that might have more to do with GM's finance arm than the auto manufacturing.

GM does have pockets of stifled innovation. What has happened in Cadillac is contrary to a trend imposed by GM corporate. How many more pockets could be liberated? So maybe Kerkorian sees a long term profit as he did for Chrysler.

Others had considered doing same as Kerkorian with other intentions. For example Carl Icahn had intended to break up GM into parts. GMs value as separate entities has been long considered worth more than GM as a whole. Even smaller Toyota has an equity (stock market) value five times that of GM.

But Icahn discovered that GM is structured to make a break up difficult. For example, so that each division could not be sold off, 1970s GM created GM Assembly Division that manufacturers cars from each division in the same factory.

Does Kerkorian see part of GM that can be spun off as Delphi and EDS Systems were? Or does he see a company that could trash its current management to liberate pockets of innnovation?

Liberation of the innovators, after all, saved Chrysler. Iacocca simply put bean counters as subordinates the the car guys. Letting car guys make decisions resulted in profits so large and so fast that Chrysler could pay off those emergency loans in less than four years. Maybe Kerkorian sees another Chrysler. But again, that means GM must first perform serious top management shakeouts.

The current top man, Wagoner, never ran a profitable North American operations. So they made him the CEO. Now he is running even the international division into the ground. His entire job experience is a finance guy. Eliminating Wagoner and his peers could quickly liberate GM innovators. And so the question is whether GM stock at $30 per share has dropped enough to make this risky venture profitable to Kerkorian. If he does not intend to break GM up into more profitable entities, then he must be intending to eliminate the problem in GM - its top management. Or he may simply discover what both Ross Perot and Carl Icahn discovered - and back out.