Once Upon a Car Part 6

The GM board was meeting more frequently than usual, mostly to consider a ma.s.sive deal to sell a majority interest in the GMAC finance unit to the private equity firm Cerberus Capital Management. At a meeting in New York in late March, the directors asked Wagoner to excuse himself early on. He wound up waiting two hours without ever being called back in. Wagoner didn't know that behind closed doors, the directors weren't discussing GMAC; they were talking about him.

"The board was trying to figure out what to do, in terms of Rick's tenure," said Bryan. "Jerry was pumping for having a role of some sort . . . CEO or chairman. There was no question he was itching to try."

The conversation among the directors got heated, and opinions were split on whether GM was better off with or without Wagoner. Several ideas were thrown around, including installing York as chairman and Fritz Henderson as chief executive. But George Fisher had a scheduling conflict and was not present. Another board member had to leave early. It was decided that the topic was too important to proceed without all the directors in the room. Some who were there-especially York-wanted to continue the discussion to its conclusion. So they agreed to hold a special meeting on April 9 to debate whether Wagoner should keep his job.

When Fisher learned what had gone on, he privately told Wagoner about it. The message was clear: GM's chief executive was in some serious trouble.

Wagoner's inner circle gathered on March 30 around the conference table in his Renaissance Center office in Detroit. His two most influential advisors on hand were Steve Harris, the veteran public relations executive who had just come out of retirement to rejoin GM, and Thomas Gottschalk, the automaker's top corporate lawyer. Both men were close to Wagoner, and both told him point blank he had better fight for his job. "You can't afford to be stoic at this point," Gottschalk said.

Harris was even more forthright. "You have become the story of this company," he told Wagoner. "Perception has become reality." Harris knew how uncomfortable Wagoner was with talking about himself, much less defending his accomplishments as CEO. That didn't matter anymore. "Rick, you have got to confront this now," Harris said.

Harris and an outside consultant, Dan McGinn, had come up with a strategy. One part was called the Detroit Project, which consisted of Wagoner personally defending GM and himself in interviews with major newspapers, magazines, and television networks. The second was dubbed the Arlington Project (which would operate from the city in Virginia where McGinn's company was based). This was a broader effort involving dozens of GM executives touting the company in sixteen key markets across the United States. "We aren't telling our story consistently," Harris said. "We need consistent messaging."

GM dealers would be involved as well, trying to build gra.s.sroots support for the company and its beleaguered leader. It all sounded distasteful to Wagoner, who felt that GM was obviously making all the right moves as fast as it could. And he really didn't want more of the spotlight on him. "I hate the idea of going out and talking about me," he said. But he knew his career at GM was at a dangerous crossroads. Wagoner was compet.i.tive and would not go down easily. He agreed to do whatever interviews Harris set up.

The tougher issue was with the board. If Wagoner was losing support among the directors, it was only a matter of time before York got him fired. He needed to act before the special meeting convened on April 9.

The board was holding a conference call on April 2 to approve the GMAC sale, which at any other time would have been a seismic event. It gave Wagoner an opening to do something he had never imagined doing-asking for a vote of confidence. If he didn't get it, he saw no alternative but to resign.

In his darkest hour, Wagoner sought advice from Jack Smith, his friend and predecessor as chairman and CEO, and George Fisher, whom he had worked so closely with as lead director. Smith urged Wagoner to take a stand. "You have got to a.s.sert yourself," he said.

Fisher wholeheartedly agreed. He was aghast that York had stirred up the board to the point where it would consider replacing Wagoner. "There's n.o.body better in the industry than you, Rick," Fisher said. "You're our guy." He offered to draft a statement of support and then try to convince the other directors to go along with it.

Wagoner still wasn't sure. It just wasn't his style to make himself the issue. He was a team player, a loyal soldier who consistently tried to keep his ego out of the equation. If the board really thought someone else could do a better job, maybe it was right.

Finally Wagoner went to Bob Lutz. They were as different as any two auto executives could ever be: the self-effacing, by-the-book chief executive officer and his mercurial, outspoken deputy. It gratified Lutz immensely that Wagoner was turning to him. He had been begging his boss for months to stand up for what was right at GM and to put all these annoying critics in their place. Lutz didn't want York turning GM upside down any more than Wagoner did. And one thing Lutz knew was how to wield power. Sure, there was some risk in asking for a vote of confidence. But winners stick their neck out for what they believe in. "Under the circ.u.mstances, it's what you have to do," Lutz said. "You have got to get out there and take it on."

On Sunday, April 2, the GM board members dialed into a conference call from their homes in Miami, Chicago, Phoenix, and as far away as Sweden. York was in his condo in suburban Detroit. Wagoner was in his office. Fisher had already told the other directors that the embattled CEO planned to make a personal plea for their support. He also had forwarded drafts of press releases that affirmed the board's confidence in management, noting that the GMAC sale underscored the positive direction GM was heading in. With those releases on the table, Wagoner made his pitch.

The agenda of the upcoming April 9 board meeting, Wagoner said, put him in an "untenable situation" and compromised his authority to run General Motors. They had made great strides, but he couldn't keep doing his job without knowing whether the board was behind him. "The plan is in place," he said. "The plan is working. But I cannot operate without the strong support of the board." He wasn't going to belabor the point. He simply needed their complete confidence to execute the turnaround all of them had worked so hard for. "You all have received the draft press release," he said. "If GM can't put out this press release Monday morning, I'm going to have to resign." Then he thanked them and left the call.

Threatening to resign was an unexpected and powerful move. Wagoner had raised the stakes big-time. If he didn't get what he wanted, the board would have a five-alarm crisis on its hands. At Fisher's suggestion, the directors responded in alphabetical order. Some expressed reservations about publicly issuing a show of support that might not hold up down the road. Most of them, though, were more worried about the fallout if Wagoner abruptly resigned before they could decide on a permanent replacement. A few defended him outright, citing the progress made with the UAW buyouts and health care deal. As expected, Fisher argued forcefully that keeping Wagoner was in the company's immediate best interest.

York was the last to speak. After hearing everyone else, he knew where this discussion was headed. Wagoner wasn't going anywhere-for now. "You know how I feel," he said cryptically. "There has got to be some accountability here." Fisher then called for a consensus about putting out a vote of confidence, and a majority concurred. But York and at least three others were adamant that the press release could not describe it as a "unanimous" vote.

Almost as an afterthought, the directors approved the sale of a 51 percent stake in GMAC to Cerberus-a monumental deal that could net GM about $14 billion in badly needed cash over the next three years. Then, as if to slam the door shut on the Wagoner discussion, Fisher officially canceled the April 9 board meeting.

The next day, GM announced its epic agreement to sell a controlling stake in its finance division. It was hardly a victory; GMAC had been one of the company's few reliable sources of earnings for years. But selling it would help pay for the buyouts, fund new products, and sh.o.r.e up an increasingly weak balance sheet. In the press release, Wagoner hailed the move as a "milestone" and another in a series of "bold initiatives" that positioned the automaker for "long-term success."

Buried in the fifth paragraph was a seemingly innocuous quote from Fisher: "While there is much work to be done, the GM Board has great confidence in Rick Wagoner, his management team and the plan they are implementing to restore the company to profitability." The world had no way of knowing that single sentence was the only reason Wagoner was still in charge at General Motors. At the media briefing afterward, Wagoner was asked about the statement. "I appreciate the support from the board, our employees, my wife-anybody I can get it from these days," he said with a weary smile.

Over the next week, the Detroit Project cranked up. Wagoner did a ton of interviews, and the theme of his remarks was remarkably consistent: GM had big challenges ahead, and he was the best man to lead it through them.

"I'm doing what I'm doing because I love General Motors," he told the Detroit News. "I think it's very important what we're doing as a company, and I think I'm by far the most qualified person to do it." He expressed grat.i.tude that the directors, employees, and executives were standing behind him. "Some days you feel better than others," he said to Newsweek. "But people count on me every day to be out there and drive the business and be positive." And when he was asked on the CBS News program Face the Nation if he had any plans to resign, he didn't blink, even though just twenty-four hours earlier he had been ready to walk out the door.

"I have no plans at all," Wagoner said. "I wouldn't be in this job if I didn't think I was the right guy to do it."

Chapter Fourteen.

Rick Wagoner cared about his job. And tens of thousands of autoworkers across the United States cared about theirs. The difference was that the GM chief executive saw his talents as essential to the company, while the men and women in the factories were considered expendable.

That view wasn't unique to GM. The management of Ford and Delphi were also building their comebacks on the oldest restructuring formula in America-eliminating jobs and shutting factories. Chrysler had already led the way by downsizing drastically. There was no question Detroit had too many workers and factories. In the first half of 2006, foreign brands accounted for 53 percent of all retail vehicle sales in the country, marking the first time that the Big Three's combined share fell to less than half. Their immense size was once an advantage. But it had become a slow-acting poison. The companies just couldn't sell enough cars to support the generations of people who built their products. Detroit was suffocating under the weight of its own history. And the emergency surgery to save it would be traumatic, painful, and expensive.

While the power struggle at GM went on behind the scenes, Detroit's foundation continued to crumble. Once again it was Steve Miller wielding the sledgehammer. On March 31, 2006, Delphi asked the bankruptcy court to allow it to close twenty-one of its twenty-nine U.S. factories, freeze pensions, cut a quarter of its salaried workers, and void all its labor agreements. It also wanted to cancel $5 billion in contracts to sell parts to GM. Altogether it was a blueprint for gutting the largest parts-making operation in America and wiping out thirty thousand union and white-collar jobs.

In the court filing, Miller said that Delphi's future was primarily in China, India, Mexico, and other low-wage nations. "Emergence from the Chapter 11 process in the U.S.," he said, "requires us to make difficult, but necessary decisions."

The news. .h.i.t Ron Gettelfinger like a kick in the teeth. "This is a travesty, and a concern for every American," he said. It didn't take long for the UAW to threaten a counterattack. If its labor contract was canceled, the union said it would be "impossible to avoid a long strike." Within days, local union officials at targeted plants were talking about unauthorized wildcat strikes that would not only hurt Delphi but cripple General Motors. a.n.a.lysts estimated that GM stood to lose up to $8 billion during a sixty-day strike (although some added that a shutdown would have a silver lining of reducing its bulging backlog of unsold cars).

A ruling by a bankruptcy judge on the Delphi plan could take months. Miller claimed he'd rather negotiate the radical reorganization with the union and GM than rely on a judge's order. But this was a test of wills, and it was unlikely the UAW would go down without a fight.

Fritz Henderson was the man in the middle. Gettelfinger refused to talk to Miller and vice versa, so Henderson shuttled back and forth between the two sides. Both Delphi and the union wanted GM to absorb all the costs of worker buyouts, pensions, and health care. It had been seven years since GM spun off the sprawling parts business so it wouldn't have to pay big wages for commodity components. Now Delphi had come back to haunt the automaker when it could least afford it.

The UAW had an amazing track record over the years of leveraging wage hikes and benefits out of GM, Ford, and Chrysler by pitting one company against the others. If the union negotiated a sweet deal with Ford, the other two would be forced to match it or suffer a costly and debilitating strike. The root of the union's power was always a strike. Used strategically, it was the ultimate weapon. The last major one had occurred in 1998, when workers at two GM parts plants in Flint, Michigan, walked off the job for fifty-four days to protest outsourcing. The break in the supply chain shut down almost every GM a.s.sembly plant in the nation. The strike ended up costing the company more than $2 billion, and the workers got what they wanted-guarantees of jobs and investment. A year later, GM spun off all its parts operations into newly formed Delphi. And now one of the plants on the bankruptcy closing list was Flint East-the site of the 1998 strike.

But strikes didn't empower the UAW anymore. A walkout at Delphi could push GM itself into bankruptcy. As Detroit got weaker, the union's muscle withered along with it. The best Gettelfinger could do was extract as much money as possible from the companies to buy out some workers so that jobs would be left for others. The union's historic swagger was fading fast, and reality was setting in. For decades the union won higher pay and benefits because it was a tough, powerful opponent. But those days were over.

"The global economy has turned a blowtorch on Detroit," said Harley Shaiken, a University of California at Berkeley labor professor who worked closely with the UAW. "Delphi is the watershed event that pushed the union into uncharted territory." More and more, the midwestern towns and cities that were bastions of union jobs had been hollowed out. The struggles of Detroit and Flint were obvious-soaring unemployment rates, waves of home foreclosures, empty downtowns that looked like sculpture gardens of abandoned buildings. But it wasn't just old urban areas in Michigan that had hit bottom.

One of the hardest-hit places was Anderson, Indiana, home to twenty-two thousand GM jobs in the 1970s and now down to twenty-five hundred autoworkers. A dozen factories had systematically been closed and boarded up. One last Delphi plant remained, and its future looked bleak. Yet Anderson was still dependent on GM and the pension checks and medical care it provided for thousands of retirees and their family members. How long the corporation could keep paying its bills was anyone's guess. "You just take it day by day," John Lollar, a seventy-four-year-old retiree, told the New York Times. "I just hope my benefits last longer than I do."

At Delphi plants across the country, vague worries had turned to fear and anger. "I'm afraid the union has sort of become a toothless dog," said Jim Grego, a twenty-five-year UAW worker at a fuel injector plant in the pristine little city of Coopersville in western Michigan. The factory had been a cornerstone of the local economy since it opened in 1981. Now Delphi wanted to shut it down and consolidate production at other facilities in Michigan and New York.

It was hard to argue with the business logic. But how could the UAW allow Coopersville's 560 jobs to be eliminated, just like that? The president of Local 2151, Robert Betts, said this would ultimately deepen the union's resolve and bind its members closer together. "It's like the Romans," said Betts. "The more they persecuted the Christians, the more the faith grew."

Workers whose jobs were on the line weren't so sure. They were too concerned about their mortgages, car payments, and doctor bills. If the UAW was going to let Delphi close their factories without resistance, what good was a union? "I think Gettelfinger has p.u.s.s.yfooted around the issues," said Dan Lamb, a machinist at Delphi's endangered brake plant in Dayton, Ohio. "It's time to go back to our roots, when the union was militant."

Gettelfinger was fighting battles on multiple fronts-Delphi, buyouts, plant closings, health care. He was both an idealist and a pragmatist, a true believer waging a holy war and a hardheaded negotiator determined to cut the best deals possible. But it was getting harder to keep his emotions in check. The executives with the big paychecks were cutting jobs and shutting plants like it was just another day at the office. "This slash-and-burn c.r.a.p is beyond irresponsible," he railed to one of the Big Three's negotiators. "It's simply a matter of greed now. What are we, in a race to the bottom? You have a great workforce here and you want to walk away to Mexico where they're paying $10 a day?"

Gettelfinger never gave an inch in negotiations until he had to. The buyout deals were unavoidable; GM and Ford had to reduce their employment rolls to survive. The union's only option was to make it palatable and get workers enough cash to cushion the blow. But Gettelfinger tried to draw the line when he could, and he was doing it at Chrysler. Unlike GM and Ford, DaimlerChrysler was making money. Gettelfinger saw no reason to give the German powerhouse the same break on health care as the other two Detroit automakers.

It was a provocative stance. The bedrock principle of all Big Three labor contracts was parity. Whatever one company negotiated with the UAW, the other two had to follow suit. But health care discussions with the new head of the Chrysler division, Tom LaSorda, were going nowhere. As a longtime manufacturing executive, LaSorda was supposedly adept at the bargaining table. But he couldn't get Gettelfinger to budge. Every time he argued that Chrysler deserved the same adjustments as GM and Ford, the union boss stubbornly pointed to the bottom line. "Your company is in a different situation than them," he said.

At one point Dieter Zetsche stepped in. He was already deeply distressed over Chrysler's legacy costs, and he had instructed his top German executives to investigate dumping the American division. It was still a well-kept secret, known only to his inner circle. Even Tom LaSorda didn't know that Zetsche was considering a sale of Chrysler. But the plan was gaining momentum in Stuttgart in the spring of 2006 when Zetsche sat down with Gettelfinger in Detroit.

Zetsche was baffled that Gettelfinger was so obstinate about not giving Chrysler concessions on health care. This was no small matter; the automaker stood to save hundreds of millions of dollars with the same deal as its two Detroit rivals. And the union wouldn't do it because DaimlerChrysler was earning a profit? "I was totally convinced it would only be a question of time that we would get a comparable deal," Zetsche said. "I couldn't believe it."

When Gettelfinger told him the union wouldn't bend, Zetsche looked at him hard. He wanted the UAW to know it should not count on the rich German parent sticking with Chrysler indefinitely. "The a.s.sumption that there will always be big coffers behind Chrysler could be the wrong a.s.sumption," he said.

Gettelfinger didn't get the hint. So Zetsche spelled it out. "You know, the status quo might not necessarily be the situation forever," he said.

Whatever Zetsche was saying, Gettelfinger wasn't buying it. Chrysler retirees, he said, should not have to sacrifice health care at a company that was earning big profits-end of story.

That att.i.tude was exactly why Zetsche was losing sleep over Detroit. These union guys didn't get it. This was business, and he could play hardball too. He had one last warning.

"You might make a major mistake," Zetsche said, "if that is your final position."

The General Motors board convened on May 2 for its regular monthly meeting, the first since the showdown on Wagoner. The storm had pa.s.sed, but the tension was still palpable. Wagoner clearly was wary of York. "Rick didn't have to say anything," Fritz Henderson said. "You could see it in his body language." The Detroit Project media blitz had spread the word that the GM chief executive was firmly in command. When the company reported its first-quarter results-a $323 million loss-Wagoner hailed the numbers on live television as evidence of progress. "Clearly we're moving in the right direction," he said on CNBC. (GM would later get a ruling from the SEC that allowed it to restate the quarter as a $445 million profit.) But all was not well inside the Renaissance Center. In a rare bloodletting, two senior executives-Paul Schmidt, the corporate controller, and Peter Bible, the chief accounting officer-were forced to resign because of the accounting blunders. Steve Girsky was also leaving, by his own choice. He said he was anxious to return home to his family in New York. But privately Girsky sounded dispirited by his lack of influence on management and concerned that GM was doing too little too late to turn itself around. "Time is the big enemy," he said. "Does GM have enough time to do what it needs to do?"

The most intriguing item on the board's agenda was the presentation that Jerry York had asked for on U.S. market share projections. Paul Ballew, GM's top market a.n.a.lyst, concluded that GM's current 24 percent share would fall to 20 percent within five years. It was a disturbing decline considering the company had lots of new products coming. Some of the loss was the result of fewer factories, less production, and a conscious effort to pull back on fleet sales and cheap leases. But the bigger factor was more compet.i.tion from new models planned by Toyota, Honda, and the other Asian automakers. This was not news to anyone. But to see it in such stark terms was unsettling. York looked over to gauge Wagoner's reaction. "He could hardly bring himself to talk about it," York said. "How can you stand there and accept that you are going to keep losing share?"

Right then, York vowed to get rid of Wagoner. Instead of wasting time trying to sway the board, York had a better idea. He would match Wagoner up with a rival, someone who would show the GM directors what a truly dynamic CEO looked like. And he knew exactly who he wanted.

Carlos Ghosn got the call in his office in Paris.

"h.e.l.lo, Carlos, this is Jerry York," York said on the phone. "I'm calling on behalf of Kirk Kerkorian."

Ghosn had never met York or Kerkorian. But he knew of their dealings with Chrysler and their role in its 1998 merger with Daimler-Benz. They were working on GM now, York said, and they were very interested in what Ghosn had accomplished with the alliance of the French carmaker Renault and Nissan Motor of j.a.pan.

"Is there anything we can do together?" York said. "I'd like to talk to you about your strategy, how you see GM and the industry."

It was not unusual for Ghosn to get inquiries about the alliance from other automakers. But this sounded different, almost urgent. Of course, he said, he would be delighted to meet with York.

On May 8, York walked into a private dining room at the elegant Dorchester Hotel in London and introduced himself to Ghosn, the fifty-two-year-old chief executive of Renault and Nissan and one of the auto world's brightest stars. Over the previous seven years, Ghosn had resurrected debt-ridden Nissan, streamlined stodgy Renault, and fashioned a groundbreaking alliance between the two. While the corporations were independent, each owned a large stake in the other, and they collaborated closely on purchasing parts and developing products. The arrangement had been a smashing success. Both companies were solidly profitable and growing steadily. Together, the Renault-Nissan alliance ranked as the world's fourth-largest automaker, behind GM, Toyota, and Ford. And Ghosn made no secret that he would like to add a third, North Americanbased automaker to their international coalition.

Bill Ford had already tried to lure Ghosn to Ford but to no avail. Why work for the Ford family when he had freedom to run both Renault and Nissan as he pleased? Ghosn had created something unique in the auto industry. Running two carmakers simultaneously was no small feat. In the process, he had earned a reputation as both a cost-cutter and an inspired manager. Investors revered him for publicly setting targets and delivering results; the stock prices of both companies had gained substantially under his leadership. He was skilled (two engineering degrees), exotic (born in Brazil to a Lebanese father and a French mother), and terribly charismatic (hero of a j.a.panese comic book, The True Story of Carlos Ghosn). Short in stature, with an oval face, jet-black hair, and piercing dark eyes, Ghosn captivated York from the moment they sat down to lunch.

Ghosn was candid, confident, and br.i.m.m.i.n.g with ideas. In French-accented English, he explained how the alliance not only had saved Renault and Nissan billions but also blended their respective strengths in engineering and design. He impressed York with how he supervised early decisions on vehicle styling. "For our large-volume products, I'm looking at clay models before they're even finished," he said.

He also believed strongly in building cars with specific consumers in mind. "You try to put yourself in the situation of the buyer," he said. "I'm not looking at it as Carlos Ghosn. I'm looking at it as a thirty-five-year-old male with a high income." And he was convinced that with a strong third partner in the alliance-General Motors or Ford, for example-the combination would be a leading force in the global auto industry for decades to come.

York asked him straight out: "Would you consider adding GM as a partner?"

Absolutely, Ghosn replied. There were huge potential synergies that could benefit GM as well as Renault and Nissan. Then he made a point that York couldn't have said better himself. "Jerry, I call Toyota the beast," he said. "The beast just keeps getting stronger and stronger. And the source of the beast's food is General Motors and Ford. The most important issue in the worldwide auto industry is for the beast to run out of food."

York was blown away. He couldn't remember the last time he had agreed so completely with someone. He wanted Ghosn to meet Kerkorian as soon as possible. When they finished lunch, York called his boss in Los Angeles. "Kirk, you've got to meet this guy," York said over the phone. "He's a product maniac. Compared to him, Rick Wagoner is pathetic."

The lights dimmed in the big hall at the MGM Grand Hotel and Casino in Las Vegas as Ron Gettelfinger took the stage on June 12 to open the thirty-fourth Const.i.tutional Convention of the United Auto Workers union. Thirteen hundred delegates from across the UAW quieted down and took their seats. Over the next four days, the union would a.s.sess its challenges, plan strategy, and reelect Gettelfinger to a second four-year term as president. The straitlaced union leader had tried to move the convention from its traditional location in Vegas to Detroit. But too many union officials had their heart set on meeting in Sin City, where coincidentally the UAW was trying to organize casino employees to replace the thinning ranks of autoworkers.

For his state-of-the-union speech, Gettelfinger changed from his usual open-collared work shirt and slacks into a dark suit and blue necktie. He had a heavy message to deliver not only to the delegates but also to the TV crews and reporters covering the convention. The Big Three were telling workers to give up their hard-earned paychecks and benefits for the good of the corporations. Now it was his turn to tell the world what the men and women on the a.s.sembly line believed in, and what they would fight for.

"What's at stake," he said to the hushed crowd, "is more than our paychecks and benefits. What's at stake is our shared vision of an America that lives up to its promise of freedom, opportunity, dignity, and social and economic justice for all. That's our American dream. Now, we know that many of those who measure their lives by the value of their stock portfolios, the square footage of their homes in gated communities, and their exotic vacation homes think our vision belongs to a fading past that has no place in today's global economy. In fact, whether they say it publicly or not, they wholeheartedly agree with Delphi CEO Steve Miller that American workers need to get over the idea of having a middle-cla.s.s lifestyle and resign themselves to barely sc.r.a.ping by."

He paused for a second and then went on, his soft southern drawl the only sound in the room: "Well, we've got news for them!" he said, pounding the lectern. "We're not going to surrender. We're not going to lower our sights, give up our dreams, or give up the fight for a better world for our children and grandchildren. We're going to keep fighting for what we believe in!"

The place erupted. Delegates jumped to their feet and cheered. Gettelfinger had hit a nerve and unleashed the anger, frustration, hope, and spirit of a union tired of being on the ropes. The rest of the speech was like a revival meeting; by the end everybody was standing. As the hall rang with applause, Gettelfinger locked arms onstage with other union leaders. Loudspeakers blared out the song "No Surrender" by Bruce Springsteen, the rock-and-roll poet of the working cla.s.s. Together, the entire a.s.sembly marched out of the hotel and onto the street, waving signs and shouting slogans in the brutal heat of the Las Vegas summer.

The rest of the convention was anticlimactic. Gettelfinger's reelection was basically unopposed. On the final day, he named the officials who would lead the bargaining for new contracts with the Detroit automakers in 2007. "We have to roll up our sleeves," he said, "and get to work." His last order of business was to meet with reporters. He shared one bit of news with them: with a week to go in the buyout program, twenty-five thousand GM workers and more than eight thousand Delphi employees had so far accepted cash offers to leave their jobs.

That same day, Ghosn arrived in Nashville, Tennessee, to unveil plans for Nissan's new U.S. headquarters. This was a big step for the j.a.panese automaker. Its main office had been in California along with all the other Asian car companies. But now its American executives would be working just down the highway from Nissan's a.s.sembly plant in the town of Smyrna. "This is a good opportunity to make some changes in the organization and get more efficiency," Ghosn said. After the event, he went to his suite at the Vanderbilt Hotel, where Jerry York, Kirk Kerkorian, and Terry Christensen, Kerkorian's attorney, joined him for dinner.

Ghosn was no innocent. He knew these men had grave concerns about where GM was heading. They wanted an alternative strategy and an aggressive one at that. Kerkorian didn't say much during dinner, but when he did, Ghosn noticed how York and Christensen immediately deferred to their billionaire boss. "Nothing is happening with GM and the stock price," Kerkorian said. "I'm afraid they're going nowhere with the people they've got." Ghosn described how the Renault-Nissan combination worked. He said he welcomed General Motors as a third partner, but only if it entered the alliance willingly. Renault and Nissan worked so well together because their managements totally embraced the process.

Another critical factor in the Renault-Nissan combination's success was the cross-shareholding arrangement. Ghosn suggested that Renault-Nissan buy a 20 percent stake in GM to cement the alliance. If that could happen, he envisioned great success for all three companies. He had studied how GM would fit into the picture, describing in detail how Nissan could seamlessly build its models in one of the Detroit automaker's underutilized truck plants.

Then York threw out what was uppermost in his mind. a.s.suming GM could be brought into the alliance, he eventually wanted Ghosn to take over as its chief executive. What did he think about that possibility?

That discussion, Ghosn said, was premature. "I cannot run three companies at the same time," he said. "The only thing we can do is select a CEO for General Motors that we all agree on."

His answer seemed to satisfy York and Kerkorian for the time being. The next move was up to them. They left in high spirits and went to the airport. Before they split up, they agreed that York would put their cards on the table with Wagoner and see how he reacted. And they came up with a code name for their grand plan: "Project Supercar."

Three days later, York laid the situation out to Wagoner on the phone. "Kirk and I met with Carlos Ghosn," he said. "Carlos is interested in expanding the alliance with GM. I'd like you to call Kirk and get his thoughts on this."

Wagoner was shocked. They had met with Carlos Ghosn, the chief executive of two rival auto companies, without telling him or the board? He didn't know what to say. Now he was supposed to call Kerkorian? What was going on here? After an awkward silence, he agreed to make the call, then hung up.

The next day, June 20, Kerkorian waited for the phone call that never came. He was not happy. He owned almost 10 percent of GM and Wagoner was ignoring him. When the GM chief executive finally did call the following day, the conversation was hardly satisfactory. Once it was over Kerkorian called York, who later described his boss as "p.i.s.sed beyond belief."

"Wagoner called me, Jerry, and he didn't want to talk about any of the business arguments," Kerkorian said. "He just G.o.dd.a.m.ned wanted to know who was in the meeting and why he didn't know about it. He didn't even care about the business arguments. Well, f.u.c.k him! We'll do a f.u.c.king 13D filing."

York tried to calm him down. This wasn't the time to go public with an SEC filing that detailed their plans to seek an alliance with Renault-Nissan. "Let me talk to him, Kirk," he said.

On June 22, York met with Wagoner in his office. He brought along a spreadsheet to show exactly how Renault-Nissan and GM could pool their resources to purchase parts, share engines and vehicle platforms, grow in overseas markets, and keep all their plants running at full capacity. York found himself getting really excited describing it. "Rick, this could be the King Kong company in the industry, way larger than Toyota," he said. "My G.o.d, there are opportunities to generate huge efficiencies."

Wagoner just looked at him. Did Kerkorian and York really believe they could muscle GM into an alliance? These guys were dangerous. Wagoner had to be careful not to start a war on the spot. "Okay," he said stiffly. "I'll call Carlos."

That afternoon he made a brief, cordial phone call to Ghosn. They agreed to meet in mid-July, on a day Ghosn was already scheduled to be in Detroit. When he relayed the information back to York, Wagoner thought for sure this would placate Kerkorian.

But it didn't. A few more days went by, and the elderly financier started getting antsy, calling York and peppering him with questions. Why wasn't the GM board meeting on this? What was taking so long? This was a great idea. Why didn't Wagoner move on this now? Finally, on June 30, Kerkorian couldn't wait any longer. "Jerry," he said, "put out that 13D."

"Okay," York said. "But now the s.h.i.t is really going to hit the fan."

The 13D filing with the SEC consisted of a letter written by the Tracinda Corporation (Kerkorian's investment firm) to Wagoner and the GM board of directors. It was brief and to the point: Renault-Nissan was interested in bringing GM into their alliance and buying a big chunk of General Motors stock. "We urge the Board of Directors to form a committee to immediately and fully explore this opportunity together with management," the letter said.

As soon as the filing hit the newswires, GM's stock shot up 9 percent. The GM board called an emergency meeting by phone. Afterward it issued a statement saying it would take Kerkorian's proposal "under advis.e.m.e.nt."

Ghosn was as surprised as anybody that Kerkorian and York had gone public. In response, Renault-Nissan put out a carefully worded statement emphasizing that the alliance would pursue a deal only if GM wanted it. "It is necessary that the GM Board and top management fully support this project in order to start the study of this opportunity," it said.

The media jumped all over the news with banner headlines and breathless coverage. This was potentially the biggest deal in automotive history, a shocking development that riveted the entire industry. It was so epic that it completely overshadowed the final tally of blue-collar buyouts: thirty-five thousand GM workers and another twelve thousand at Delphi.

The GM board met in person a week later. In his opening remarks, Wagoner said management was "uncomfortable" with how GM had been thrust into this situation but was willing to investigate the merits of the alliance. Some directors vented their anger at York for meeting with Ghosn behind their backs. But the board had to be careful. The GM attorneys warned that rejecting the alliance idea outright could spark shareholder lawsuits.

Instead, George Fisher and others proposed that the board authorize Wagoner-and not a committee of directors that might include York-to lead "exploratory talks" with Renault and Nissan. That would give Wagoner the power to set the agenda going forward.

"We are committed to an objective and thorough review," Wagoner said in a statement. But in interviews after the meeting, he barely hid his exasperation with Kerkorian and York. "It's not the way I would have done this," he said. "And I don't think it's particularly helpful."

Ghosn flew into Detroit on July 14 for internal meetings at Nissan's technical center outside the city. He met with reporters afterward, and they bombarded him with questions about GM. Ghosn played it cool and said he was keen to have a constructive dialogue with Wagoner. "I'm not interested in his job," he said matter-of-factly. That night he had dinner with Wagoner at the Renaissance Center. The GM chief executive seemed uncomfortable and extremely cautious. There was no general discussion about the alliance or even a hint that GM's management wanted any part of it. Instead, Wagoner proposed a formal ninety-day study period, with Fritz Henderson leading the GM team. Ghosn agreed and promised to put his own top executives on the project. Before parting, they decided on a joint public statement. "We are looking forward to having our teams work together to explore our ideas," the statement said.

This is going to be interesting, Ghosn thought on his way out. He had already concluded that there was very little chance that General Motors would join the alliance under pressure from Kerkorian. But he sure could learn a lot about GM in the next ninety days.