Kerkorian Returns GM Stake to 9.9%
Signaling a renewal of his campaign to pressure General Motors Corp. to accelerate its turnaround efforts, billionaire Kirk Kerkorian said Wednesday that he had again raised his stake in the struggling automaker to 9.9%.
Kerkorian’s Beverly Hills-based investment firm Tracinda Corp. said in a regulatory filing that it bought 12 million GM shares for $263 million this week, replacing the shares he had sold last month at a loss.
The 88-year-old investor’s explanation that he had sold his stock for tax purposes was questioned at the time by many analysts, who speculated that he was losing interest in GM’s prospects because the stock had tumbled some 30% since he began building his stake in May.
Tracinda, which had left open the possibility of repurchasing the shares, replaced the shares only a few days after the 30-day waiting period that was required for the investment firm to claim a loss on the December sale.
“The litmus test for Kerkorian was whether he was going to buy back the shares,” said Himanshu Patel, an analyst with J.P. Morgan Securities.
The new stake shows Kerkorian still believes in GM’s future and “it increases the pressure on” Chief Executive Rick Wagoner, said corporate credit analyst Sean Egan of Egan-Jones Ratings Co.
GM has been losing sales for years in North America to Asian automakers and it faces soaring healthcare and pension obligations.
The world’s largest automaker lost $3.8 billion through the first nine months of 2005, and will report its fourth quarter results this morning. Most analysts expect GM to post its fifth straight unprofitable quarter and its first annual loss since 1992.
A Tracinda spokeswoman said Kerkorian and his top advisor, Jerome York, would not comment on the rebuilding of the stake. GM spokeswoman Toni Simonetti also declined to comment.
Kerkorian has been attempting to gain a seat on GM’s board for York, a former Chrysler Corp. and IBM financial executive. York advised Kerkorian during the investor’s unsuccessful bid in 1995 to acquire control of Chrysler.
This month York detailed Kerkorian’s plan to fix GM in a speech to analysts in Detroit. He called for the automaker to halve its dividend to conserve cash, to get rid of its Hummer and Saab brands, and to slash pay for everyone from Wagoner to the janitorial staff.
Kerkorian has said that he might further boost his stake to around 12%, if GM takes his advice.
Not all analysts are bullish on Kerkorian, however.
“I don’t think this has changed anything, he’s just restoring his position to what it was before, and being a 9.9% shareholder doesn’t give him that much leverage,” said David Healey, an analyst with Burnham Securities.
If Kerkorian adds to his current stake, Healey said, “then things might get a little more serious.”
Kerkorian’s prescription for slashing GM expenses “impressed me,” Healy said, “but I don’t know how much GM will take to heart.”
Although several top GM executives said they agreed with York that the company hadn’t been moving rapidly enough to improve its situation, there’s been no indication that the automaker intends to adopt any of the suggestions.
Wagoner’s own cost-cutting plan, announced in November, calls for GM to close a dozen plants and other facilities and eliminate 30,000 manufacturing jobs by 2008.
A recently negotiated change in the company’s healthcare plan for retired hourly workers is expected to save $1 billion a year.
In all, Wagoner has said that the automaker expects to cut its annual costs by $7 billion by the end of this year.
Kerkorian said in his filing that he had paid an average of $21.40 a share for 5 million shares on Monday and $22.25 a share for 7 million shares on Tuesday.
GM’s stock has risen 23% since the start of the year. It closed Wednesday at $23.85, up 80 cents.
Times wire services contributed to this report.
