Wagoner Hinted of 'Friendly' Deal

Rick Wagoner didn't say who General Motors Corp. had in mind for its next move, but he strongly hinted that GM's global strategy henceforth would be based on "friendly" alliances where full control was not necessarily a priority.

It was early in March during the Geneva Motor Show when GM President G. Richard Wagoner, who becomes chief executive officer on June 1, met with reporters in small groups for half-hour interviews in a private room above GM's stand.

Because he's likely to succeed Chairman John F. (Jack) Smith Jr. when Mr. Smith retires, possibly by year's end, what Rick Wagoner has to say these days takes on critical significance. Only 47, if he stays until retirement age he'll play a pivotal role in how GM winds up in the battle for world automotive supremacy.

Precisely two weeks after the Geneva interviews, GM and Italy's Fiat SpA revealed a broad cooperative agreement under which GM gets a 20% slice of Fiat's auto division for $2.3 billion. In exchange, Fiat gets a 5.15% stake in GM, making the Italian automaker GM's largest single shareholder.

Until then, the rumor mill had Daimler-Chrysler AG as the leading candidate for a deal with Fiat, a company that for decades has been the object of takeover rumors. Ford Motor Co. reportedly came close in the '70s and '80s, but negotiations bogged down over the issue of who'd be in control, the Ford or Agnelli family, both with controlling interests in the companies their antecedents founded.

Back to Geneva: "Our approach is not doctrinaire," says Mr. Wagoner. "We can accomplish a lot without having full control. The advantages include more efficient use of capital without all of the costs" of absorbing another company outright. GM's purchase of a 20% stake earlier this year in Fuji Heavy Industries Ltd. (Subaru) fit that category, he adds.

Equally important, he emphasizes, is nurturing a close relationship with management of the companies with which it proposes a deal. "If we are viewed as an American invader, we wouldn't do it," he says. "We want to do things where we get along with the people."

Apparently GM and Fiat found that common ground, which just may set a precedent for other alliances. BMW AG and Honda Motor Co. Ltd., for example, have repeatedly insisted they plan to remain independent despite some of the obvious advantages.

BMW, like Fiat, is controlled by a family dynasty, the Quandts. Having seen GM engineer a deal with the Agnellis gives the Quandts something to think about.

GM also has alliances with Honda (a new partner for swapping engines), Toyota Motor Corp., Isuzu Motor Co. Ltd. and Suzuki Motor Co. Ltd.

During a press conference in Geneva, Mr. Wagoner allows that automakers "are cooperating in ways that never seemed possible before." In Asia/Pacific, where GM has a tiny 4% market share, "strategic alliances are the fastest way to go - a win/win with leverage (for both sides)."

GM's pursuit of South Korea's bankrupt Daewoo Motor Corp. also could influence its future relationships with Japanese automakers, possibly including Honda. If GM's Daewoo bid is successful, its power in Asia/Pacific could escalate dramatically, with ripples spreading to the major players there, chiefly the Japanese. Ford and Korea's Hyundai Motor Co. also are bidding for Daewoo, now on auction.

With Fiat, GM apparently will get access to some hallowed brands to shore up its position in a luxury car segment where it has only two marques now, both of which are struggling: Cadillac and Saab. Fiat has Alfa Romeo, Ferrari, Maserati and Lancia under its umbrella, but only low-volume Ferrari is sold in North America. Alfa dropped out in 1995, and Fiat models haven't been sold here since 1982.

None of the Fiat luxury brands generates big volume, but they would add incalculable prestige to GM's luxury lineup to offset Ford's head start with its Premier Automotive Group, which includes Jaguar, Volvo, Lincoln and Aston Martin. It would not do much, though, to the likes of Mercedes, Lexus, BMW, Audi and Acura, all of which are on a roll in the U.S. market.

Before the Fiat agreement surfaced, Mr. Wagoner tells reporters in Geneva that both Saab and Cadillac "can be grown." GM's "game plan" is to "migrate Cadillac up" while expanding Saab's lineup. "I think there are areas where they can work together, but their products are completely different," he observes.

GM's first goal is to shore up Cadillac, a huge undertaking that gets into high gear in '02 when its Evoq "halo" model goes on sale, followed by a stream of other new models stretching into 2004. To create some excitement in Geneva, Cadillac unveils the Imaj sedan. It borrows heavily from Evoq styling cues.

GM also could import Opel's top-of-the-line 310-hp, 5.7L Omega V-8 that debuts this fall, but it has had little success in marketing Opel models in North America. The sluggish-selling Cadillac Catera, for example, is an Omega spinoff built in Germany, although an all-new, rear-drive Catera built in Lansing, MI, is scheduled for 2002 introduction.

I personally think GM could spread its luxury wings by developing a luxury group in-house, using already established price points. My candidates would be the Buick Park Avenue Ultra (and Riviera when it is revived a few years hence), Oldsmobile Aurora, Pontiac SSE and Chevrolet Corvette.

Now that would be a "friendly" alliance . . . or would it?