Kerkorian Out of the Ford Business

Posted by: David Kiley on December 29, 2008

DETROIT—Billionaire financier Kirk Kerkorian has sold the remainder of his investment in Ford Motor Co.

Tracinda, which briefly ranked as Ford’s largest outside investor earlier this year, said in a regulatory filing in October that it had begun working with bankers to sell the 133.5 million shares of the No. 2 U.S. automaker it still held at that time. A spokesman confirmed Monday that the entire stake had been sold.

Kerkorian’s decision to pull out stemmed from a combination of Ford’s collapsing stock price, as well as his own financial needs brought about by the stock market meltdown and the financier’s investments in other companies.

At its peak, Kerkorian held a 6.5 percent stake in Ford and had offered in June to support the automaker’s turnaround efforts with an infusion of additional capital. In late October, Tracinda began selling Ford shares at $2.43, representing a loss of almost 66 percent from what the fund paid on average. Since then, Ford’s shares have traded between a low of $1.02 in November to a high of $3.54 earlier this month.

Kerkorian received a $600 million loan earlier this year from Bank of America for which he pledged 50 million shares of MGM Mirage, or about one-third of Tracinda’s holdings. Since his loan, MGM shares have sunk to below $13 from $53. Kerkorian last October had to pledge an additional 50 million shares as collateral for bank loans.

Kerkorian has long had an affinity for auto companies. Kerkorian, 91, previously held a nearly 10-percent stake in General Motors Corp (NYSE:GM - News) and made a failed bid for Chrysler LLC last year. His investment group held a stake in Chrysler in the mid 1990s. He tried to mount a takeover with former Chrysler chairman Lee Iacocca. He held a board seat at Chrysler at the time the company was sold to Daimler-Benz, and he later sued the company for misrepresenting the conditions and terms of the acquisition.

Kerkorian surprised analysts and investors in April when he began buying Ford shares and spent over $1 billion to take a stake in Ford at an average price per share of $7.10. His potential influence at the company was always a question because the Ford family, while holding just under 3 percent of the automaker’s shares, controls 40 percent of the voting power through a separate class of shares.

Reader Comments

Greedy financiers

December 29, 2008 5:03 PM

Greedy wall street financiers ruined manufacturing companies. High salaries they offered to executives in return for higher quarterly profits drived companies weak in the long term, and transfered manufacturing jobs to overseas. It's time to wipe out greedy financiers.

JB

December 29, 2008 8:39 PM

The man is 91 years old for God's sake. This does not unveil further keen insight into Ford's precarious situation. Ford will restructure, however, it will take time, and by time i mean years. Kerkorian does not three years to wait for a turnaround; and when you're that age-you don't know if you have three days. What would your investor horizon be at that age? When he amassed his shares in June, he underestimated-just like so many others- the depth, pervasiveness, and prolonged duration of this recession. All of the reasons Kerkorian purchased shares of Ford in June, seeing it as a strong prospect, currently remain the same EXCEPT the plausibility of a longer than anticipated recession.

Bill

December 29, 2008 9:42 PM

Actually, it was and still is the greedy unions that ruined the auto companies. They kept demanding benefits beyond any productivity increases or common sense. The company managers helped by giving into their ridiculous demands.

Jim

December 29, 2008 11:08 PM

That’s right; the greedy WS financiers have ruined US industries by focusing too much to short term profits. Our industries are unable to compete against their Japanese or European counterparts in both long term R&D and investments, instead keep pushing on sort term profits wasted for top managements and investment financier’s bonuses.

We need smarter regulations for Wall Street, not just adding full of loophole amendments, stop our borrowing habit’s and spend only within our means.

Paul (Vw)

December 30, 2008 8:24 AM

Wasn't Kerkorkian's unsuccessful bid (along with Lee Iacocca) for Chrysler one of the catalysts for the Daimler/Chrysler "merger of equals" (so-called at the time)? It's been a number of years since I've read "Taken for a Ride: How Daimler-Benz Drove Off With Chrysler," but that is the impression I seem to have walked away with.

It will be interesting to see how history treats Mr. Kerkorkian with respect to his effect on the auto industry.

Alex Bartra

January 1, 2009 4:16 PM

Maybe he has sizable alternate obligations but I think he got out prematurely. Ford is, in my opinion positioned for a quicker recovery than Chrysler and Gm once we get some consumer confidence in place.

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