Auto Industry: GM Loses Its Back-Seat Driver

Struggling General Motors had some good news lately, with its sales rising 6 percent in November and the debut last week of its curvaceous new Buick Enclave. But for besieged CEO Rick Wagoner, the best news had to have come Thursday, when Las Vegas billionaire Kirk Kerkorian cashed out his final 28 million shares of GM stock. In the course of a week, Kerkorian--whom analysts believed was gunning for Wagoner--went from being GM's largest individual shareholder to just another outsider the Detroit establishment ran off the road.

Now GM has to keep moving forward--even without Kerkorian as back-seat driver. GM is farther down the road to recovery than its crosstown rivals, who are hemorrhaging billions while GM is merely losing millions. And analysts say Wagoner owes some thanks to Kerkorian for that. Sure, the two probably parted ways because Wagoner wouldn't go along with Kerkorian's ambitious plan to align GM with France's Renault and Japan's Nissan, creating a car colossus controlling a quarter of the world's auto market. But Kerkorian also put some much-needed pressure on GM to get the lead out. Now that he's gone, Wall Street worries GM will ease up. "Having somebody chasing after you often prompts you to run faster," wrote Morgan Stanley analyst Jonathan Steinmetz in a note to investors that warned of the negative effect of GM losing its "change agent." But Wagoner's supporters point to the $9 billion in cost cuts he's made in the last year.

But if the relationship worked well for GM, was it also good for Kerkorian? He started amassing his 9.9 percent stake in GM in April 2005. Now the Vegas high roller is folding his hand without making any money on his $1.7 billion bet on GM. That's not how the 89-year-old built his $9 billion fortune. Some observers speculate that the savvy dealmaker will wait in the weeds and re-emerge if things get worse for GM. "I truly don't believe he's gone," says Merrill Lynch auto analyst John Murphy. "I think he'll come back, but at a lower stock price."

For now, Kerkorian joins a long line of outsiders who exited unhappily from GM. Remember Ross Perot, who derided his fellow GM directors for being "pet rocks" as he walked out the door? "GM tends to throw off these antibodies," says veteran analyst Joe Phillippi, "and [the GM insiders] always rise up and kill off the invader." They got Kerkorian out. The danger? That GM, in celebration, will take its foot off that gas.