What Next Kerkorian?

April 29, 2008
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What’s next for Kirk Kerkorian, the maverick billionaire, who has touched off a wave of speculation following his plan to snap up 20 million shares of Ford Motor Co. stock?

It’s not the reclusive octogenarian’s first foray into Detroit. In the mid-1990s, Kerkorian built up a major stake in Chrysler Corp., then launched a bitter but ultimately unsuccessful effort to buy the smallest of the Big Three automakers. The hostile takeover attempt was one of the reasons Chrysler management subsequently decided to merge with Germany’s Daimler-Benz AG – a deal that unwound in 2007.

Several years ago, Kerkorian amassed holdings in General Motors, then pushed the company – at the time, in serious financial trouble – to study a possible alliance with the Japanese/French partnership, Nissan/Renault. GM ultimately rejected the proposal and Kerkorian decided to sell off his holdings.

Now Kerkorian is eyeing Ford. But how much influence he can wield is unclear. The heirs of company founder Henry Ford currently hold just 4 percent of the automaker’s stock – but because that is a unique class of shares, they have 40 percent of the voting rights. That’s enough, most analysts believe, to prevent a hostile takeover.

Still, Kerkorian could demand one or more seats on the Ford board, as he did at Chrysler and GM, and try to influence its strategy. He could, for example, seek to drive Ford into some sort of alliance with another automaker. In years past, many believed Ford would wind up part of the Nissan/Renault alliance, though earlier this year, that Japanese/French group announced several deals with Chrysler.

For now, the Las Vegas-based Kerkorian’s Tracinda Corp. is saying only that it is impressed with Ford’s ongoing turnaround efforts – the company announced a surprise, $100 million profit for the first quarter, though its troubled North American operations remained in the red.

"Tracinda believes that Ford management under the leadership of Chief Executive Officer Alan Mulally will continue to show significant improvements in its results going forward," Tracinda said in the statement.

The good news for Ford is that investors have at least initially taken Kerkorian’s announcement as a positive sign. Ford’s stock soared on Monday, and some observers believe it has plenty of upside in the weeks and months to come.

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