I'm the Right Guy for GM'; Embattled CEO Rick Wagoner warily welcomes talks on an alliance with Renault-Nissan and its famed savior, Carlos Ghosn.

Byline: Keith Naughton (With Tracy McNicoll in Paris)

On the Friday morning before all of General Motors was to go on its

Independence Day holiday, a surprise letter hummed over CEO Rick Wagoner's fax machine. It was from GM's largest individual investor, 89-year-old Vegas billionaire Kirk Kerkorian. And though it was addressed to Wagoner, the June 30 missive was simultaneously telegraphed to the world in an SEC filing. Kerkorian, growing impatient with Wagoner, decided to shake things up by outing top-secret talks he'd initiated to arrange a shotgun marriage between GM, France's Renault and Japan's Nissan. Wagoner, who had just learned of the talks a few days earlier, was stunned. "Well," he recalls thinking ruefully, "this looks like something else we'll have to deal with." He immediately cleared his schedule and got his board on the phone to inform it of a deal that could create a colossus controlling one quarter of the world's auto sales. But he wasn't happy that sensitive negotiations would now be conducted under the media microscope. "It's not the way I would have done it," he told NEWSWEEK. "There's a lot of aspects of all of this that haven't been normal."

Nothing is normal these days at General Motors. A turnaround that was beginning to gain some traction has now been overshadowed by a boardroom battle for control of the ailing automaker, which lost $10.6 billion last year. Many suspect that Kerkorian's real agenda is to shove Wagoner out of the driver's seat and replace him with Renault-Nissan's superstar CEO, Carlos Ghosn, who is revered in the auto industry for bringing Nissan back from the dead. Wagoner, though, is not backing down. He moved quickly to take control of the situation by getting his board's blessing to become GM's point man in the talks with Renault-Nissan. And as soon as he learned of the secret talks, he reached out to Ghosn to arrange a dinner meeting in Detroit last Friday. Afterwards, the two men said they had a good discussion and they expect to conclude their review of the proposed alliance within 90 days. Wagner also passionately defended himself in an interview with NEWSWEEK two days before meeting with Ghosn. "I don't have any problems with Carlos," Wagoner said, "but I'm quite sure that I'm the right guy to run GM."

The once genteel GM boardroom has suddenly become a rough-and-tumble place. Ever since Kerkorian's right-hand man, Jerry York, joined the board in February, reports of disharmony between the directors and their chairman have leaked out. York, a turnaround specialist who helped fix Chrysler and IBM in the '90s, was said to have raised a ruckus when a GM accounting mess was discovered this spring, forcing the automaker to restate five years' worth of earnings. Lately, GM's endless U.S. sales skid has been raising the ire of Kerkorian, York and Wall Street. "GM management has not done a good job," Bank of America analyst Ron Tadross wrote recently, even as he raised his rating on GM stock in hopes that Ghosn would take over. "GM and its shareholders would probably be well served by this proposed management infusion."

The boardroom leaks infuriate Wagoner almost as much as the attacks on his record. "Look at the facts," he says. "The pace of the turnaround is exceptionally fast, faster than anybody would have thought would be possible." Wagoner has extracted $15 billion in health-care concessions from the United Auto Workers and recently persuaded 35,000 GM workers--one third of his American work force--to accept buyouts. That put his staff-cutback plan two years ahead of schedule and allowed him to ...