If history is any guide, General Motors’ board of directors is almost certain to reject the recent demands by the leader of a bloc of four hedge funds to repurchase $8 billion in stock and a seat on the company’s board of directors.
However, the move isn’t unprecedented in the auto industry, as activist investors have succeeded in exerting significant operational control in the past. Perhaps most notably at the former Chrysler Corp. when Kirk Kerkorian, aided by Chrysler’s own executives, helped deliver Chrysler to Jurgen Schrempp’s Daimler-Benz in the now infamous “merger of equals.”
Harry Wilson, the ambitious management consultant leading the charge against GM’s current management group, is already suggesting the company’s progress towards the higher profit margins demanded by some investors is too slow. Moreover, the plan itself provides too little details on how to reach the key objectives. (more…)