To ally or not to ally: That is GM's question

The world's largest automaker stands at the brink of a make-or-break choice: whether its extreme corporate makeover is best managed from within or with foreign help.

The question is strategic but also personal: A proposed alliance between General Motors, Nissan, and Renault could end up making Carlos Ghosn – widely credited with engineering Nissan's turnaround since 1999 – a candidate to replace GM's chief executive Rick Wagoner.

For now, Mr. Wagoner has the inside track on determining GM's future, and his own. The company's board on Friday opted to have him take the lead in discussions with Nissan and Renault, both of which are led by Mr. Ghosn.

The consideration of this global linkup – designed to save costs and thus help GM return to profitability – comes at the urging of GM's largest shareholder, who is disappointed at the pace of change under Wagoner.

For all the companies involved, the risk is that an alliance could distract them at a difficult time for the automotive industry. But if done right, an alliance could benefit all three companies and perhaps nurse one of America's most storied corporations back to health.

Indeed, the imperative of cost control may push more carmakers around the world into such link-ups.

"It's continuing this internationalization of the car business," says Jeremy Anwyl, president of Edmunds.com, a provider of automotive information in Santa Monica, Calif. "The opportunity with an alliance would be to spread those costs across a broader base."

From GM's perspective, the alliance wouldn't be about "going global" in terms of dealership presence. GM already has major brands on the market from Beijing and Berlin to Mexico City. Rather, it would be about reaping global efficiencies in production and product development.

It would also be about the pace of restructuring.

GM posted stunning losses of $10.6 billion last year. The company remains the world's largest automaker, but Toyota could soon claim that title.

Wagoner has already orchestrated a difficult downsizing of US operations, recently luring 35,000 union workers into buyouts to pave the way for plant closings.

But some investors say Wagoner has too little to show for his six years as CEO.

By contrast, Ghosn has a reputation as "le cost cutter" for his radical overhaul of Nissan starting in 1999. The Brazilian-born, French-educated son of Lebanese parents, he was able to shake up the Japanese carmaker's supply chain in a way that, arguably, no insider could have done.

In its letter to GM's board on June 30, major shareholder Tracinda Corp., owned by billionaire Kirk Kerkorian, made no reference to Wagoner or Ghosn (the "s" is silent, so it's pronounced like "cone"). The letter said simply: "We believe that participating in a global partnership-alliance with Renault and Nissan could enable GM to realize substantial synergies and cost savings...."

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