Posted by: David Kiley on June 19, 2008
Billionaire investor Kirk Kerkorian raised his stake in Ford Motor Co. to 6.5 percent and said he may be interested in investing additional capital in Ford.
The 91-year old Kerkorian has spent about $1 billion in Ford so far. Should Ford, which is concerned about having enough cash to see it through the economnic downturn, need a fat wallet to bolster its balance sheet, Kerkorian could be there.
Ford projected it would have cash burn of $12-$14b between 2007 and 2009. That figure is now $14b-$16b to cope with more headcount reduction than anticipated, as well as profit shortfalls because of a decline in higher-end SUVs.
Ford has $29b in gross cash on hand, and $12 billion in credit lines. It’s total liquidity is $41 billion, and it is carrying $27 billion in debt.
Analysts believe that Ford is well positioned to weather the storm. But no one is sure just how long the storm will last.
Tracinda could be an alternative to forging an alliance with an automaker such as Renault-Nissan should Ford’s cash position weaken. But it is a road that the Ford family is, and should be, plenty wary about. When Tracinda was invested in GM, it tried to force a marriage between Renault-Nissan and GM.
Kerkorian, who has now invested about $1 billion in Ford, had previously held a 5.5 percent stake.
A long-time activist investor in the auto industry, Kerkorian could step in to propose business strategies for Ford as it attempts to turn around its money-losing U.S. operations, according to a filing by his Tracinda Corp.
Any additional capital from Kerkorian would be to give Ford more flexibility as it restructures, Tracinda said in the filing with U.S. securities regulators.
The additional purchases of Ford stock by Tracinda raise the likelihood that Kerkorian, 91, could emerge as an activist investor at the No. 2 U.S. automaker, a role he has previously taken at General Motors and Chrysler LLC.
Kerkorian’s offer of additional capital also raises questions about the long-term control of the company by the Ford family, which owns just 3 percent of the automaker’s common stock.
Tracinda surprised auto industry analysts and Ford executives by announcing in April that it had begun to acquire a stake in the automaker.