What Will Kerkorian Do Now?

With his proposed GM-Renault deal on the rocks, will the billionaire investor abandon GM or redouble his efforts?


Billionaire investor Kirk Kerkorian's vision of a massive tripartite auto alliance between General Motors (GM ) and Renault-Nissan (NSANY ) is dead. Kaput.

FILLING THE PIPELINE. That's what has Kerkorian and his crew worried. GM's market share is falling this year and forecasts project it falling next year. After that, Wagoner will have to step up some product launches to keep enough new models coming to sustain the current momentum.

Kerkorian's Tracinda thinks that sharing parts, engines, vehicle platforms, and engineering resources with Renault-Nissan could have helped GM develop new vehicles more cheaply and quickly.

But forget about that. Now, Kerkorian will have to find other ways to push GM to get what he wants. If he can't gain more influence, he may have to wait and see if Wagoner's turnaround plan continues on track—or runs off the road.

What Will Kerkorian Do Now?

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GM tightens defense against hostile acts

Bill Vlasic / The Detroit News

General Motors Corp. changed its corporate bylaws Tuesday to possibly thwart hostile actions by large shareholders such as billionaire investor Kirk Kerkorian.

While the GM board did not address Kerkorian publicly Tuesday, the directors made several moves that are typically used to block aggressive shareholders.

One change was to require any shareholder planning a "consent solicitation" to inform the company ahead of time in writing.

A consent solicitation allows stockholders to act by written consents to proposed stockholder actions in lieu of voting in person or by proxy at an annual meeting. Billionaire investor Carl Icahn has used consent solicitations in seeking the removal of board members of companies in which he owns a large stake.

A corporate legal expert said GM's move would require a shareholder -- such as Kerkorian -- to alert GM management before soliciting other shareholders to support the idea of an alliance with Renault-Nissan or another action.

"A consent solicitation can be used as a sneak attack," said Peter Henning, a Wayne State University law professor and former enforcement official with the U.S. Securities and Exchange Commission.

Consent solicitations "can be used by outsiders to force change at a company," Henning said.

On Tuesday, the GM board ruled that it must receive a written notice of a planned consent solicitation, and that the board has 10 days to consider the "validity" of the request.

Also, the shareholder behind the consent solicitation must reveal whether the move is a prelude to a proxy statement -- a device often used by dissident investors to change the composition of a board of directors.
Henning said the changes are "designed to be an early warning system" for GM of a potential shareholder revolt. He said it also indicates that GM is worried that other major shareholders may back Kerkorian's lead in forcing change on the company.

"It's a defensive measure," he said. "It's a standard anti-takeover, anti-proxy move."

The GM board also on Tuesday adopted a majority voting rule for uncontested director elections.

Majority voting requires directors to be elected by a majority of votes cast and not simply a plurality.

GM's board also rejected a proposal to allow small groups of shareholders to gain larger voting rights. The measure would have given each investor a vote for each share owned multiplied by the number of directors to be elected.

The so-called "cumulative" voting could allow a large shareholder to throw all of its votes behind a single board candidate.

Cumulative voting had been approved by a 54-percent vote at GM's annual shareholder's meeting this year. But the board said Tuesday it "chose not to adopt" the process because it "could create the potential for small groups of stockholders to overcome the interests of the majority."

GM's move comes at a time when Kerkorian and his board representative, Jerry York, have a substantial influence over the company.

There was no immediate comment Tuesday from Tracinda Corp., Kerkorian's investment firm.