Gamblers and Not Builders

Jerome B. York, left, is investor Kirk Kerkorian's representative on General Motors' board. (Mike Mergen - Bloomberg News)

Kirk Kerkorian did quite well last week. He's the investor who holds 56 million shares, an estimated 9.9 percent, of General Motors Corp., the world's largest automobile manufacturer.

Kerkorian and his representative on GM's board, Jerome B. York, have been upset with the car company of late, so much so that they have attempted to engineer the ouster of Rick Wagoner, the chairman and chief executive.

Of course, the two corporate buccaneers aren't so bold as to state their intentions exactly that way. Publicly, they say that the once-struggling, now-recovering GM could benefit from a tie-up with Japan's Nissan Motor Co. and France's Renault SA, both of which are run by management wunderkind Carlos Ghosn.

Kerkorian and York would love to see Ghosn at GM's helm, not so much because that management change would do anything meaningful for GM, Nissan or Renault, but because the simple announcement of a Ghosn takeover could boost GM's stock value, a development that would make billionaire Kerkorian and, by proxy, York, richer than they already are.

But here's betting that this gambit, now dignified by a 90-day study of a proposed GM-Nissan-Renault combination, will come to naught, and here's why: Kerkorian and York are in it strictly for the money, as readily shown by their various corporate histories of buying and selling positions in companies, with little discernible regard for the quality of products or services provided by those companies.

Although GM last week reported a second-quarter loss of $3.18 billion, primarily because of a buyout of the remaining employment contracts of 34,410 factory workers, the turnaround program put in place by Wagoner and company appears to be working.

Without those one-time employment cost-cutting and related charges, GM earned $1.15 billion in the quarter, compared with a loss of $231 million in the corresponding period a year earlier. That was enough to make Wall Street happy, and a happy Wall Street on Wednesday boosted GM's stock value 4.4 percent, to $32 a share. Kerkorian bought his GM shares at $30 a share, which means that, on top of the $131.6 million in share value he made simply by floating the GM-Nissan-Renault trial balloon at the beginning of the month, he has pretty much recouped the losses he suffered during GM's long Wall Street slide.

Maybe that will be enough to make him go away. That certainly has been his pattern, bailing out of corporate positions when the bailing gets good, which means profitable. Maybe he will hang around to see if GM actually starts making real money. The man is a gambler. Much of his wealth comes from buying and selling casinos in Las Vegas.

Loyalty is not Kerkorian's thing in matters of business, and that could mean trouble for Ghosn's standing in Kerkorian's esteem. Kerkorian is an impatient man. He has no time for backsliders, which is exactly what Nissan and Renault have been of late in Europe, where Renault is struggling, and in North America, where Nissan is beginning to collect its lumps in sales and product quality.

Also, it is more than unclear what, if anything, Nissan or Renault can do to help a GM that already seems to be doing a pretty good job of getting its act together without Ghosn's help, and despite Kerkorian and York's interference.

I suspect that the 90-day study period will reveal that the emperor, in this case, has no appropriate clothes. I suspect that Kerkorian and York already know as much. The two of them are just doing what they've always done -- rolling the dice in the hope of coming up cash-and-carry winners.