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Kirk Kerkorian, a longtime investor in the US car industry, has abruptly sold his 6.1 per cent stake in Ford. The disposal appears to mark the end of the 91-year-old financier's enduring flirtation with Detroit and comes at a considerable loss.
Kerkorian's investment firm, Tracinda, amassed the stake in April when shares in the motor manufacturer traded at more than $8. Last week Ford shares were down to just over $2.
The sale signals a marked turnaround for Kerkorian who has seen the value of another Tracinda holding, the Vegas gambling group MGM Mirage, crumble in the face of recession. Kerkorian is understood to be under pressure to meet debt obligations on a Bank of America loan and has not said whether the Ford sale marks the end of his association with the troubled American car industry.
In 1995, he joined forces with Detroit legend Lee Iacocca in an unsuccessful takeover bid for Chrysler. When the company was sold to Daimler-Benz in 1998, Tracinda was the largest shareholder. Kerkorian later sued, accusing Daimler-Benz of misleading investors over terms of the sale.
In the same era, Kerkorian built a 9.9 per cent stake in General Motors and campaigned hard for the firm to merge with Renault and Nissan. When that was refused Kerkorian dumped his investment and set his new sights on Chrysler, by now cast from its marriage to Daimler. Kerkorian lost a bidding war with private equity firm Cerberus Capital Management to acquire the business, and soon looked to Ford.
"We're in this for purely passive investment purposes," said Jerome York, a senior Tracinda adviser, of Kerkorian's Ford stake in April. "We don't care what happens in the next two or three quarters. What we are looking for is a big, big hit five, six or seven years down the road."
Ultimately, though, Kerkorian was unable to wait and started offloading part of his Ford stake in October.
Ford shares edged up after the US treasury announced new measures to help US auto groups by pledging $6 billion (BD2.3 billion) in support of GM's finance arm. The measures are in addition to the $17.4 billion emergency plan to rescue GM and Chrysler. The former industrial big-hitters were on the brink of a collapse that would have caused hundreds of thousands of job losses.
Of the total, $13.4 billion in short-term loans was earmarked for GM.
In a further extension of the $700 billion Federal 'troubled assets' bank bail-out plan, the Bush administration announced it was pumping $5 billion into GM's finance arm GMAC and lending a further $1 billion to GM to help it buy shares in GMAC, which is considered crucial to the carmaker's survival. The credit crunch has sharply limited GMAC's ability to provide financing for car buyers at GM dealerships or other kinds of funding.
Without that help, industry experts have warned, the domestic US car industry stands virtually no chance of an improvement in sales.
