Investor Seeks to Enlarge GM Stake
Billionaire investor Kirk Kerkorian, still pushing General Motors Corp. to pursue an alliance with Renault and Nissan Motor Co., said Thursday that he wanted to boost his 9.9% GM stake by at least 6 million shares and possibly by 12 million.
The move, which helped boost the Detroit automaker’s share price by 2.4%, is seen by some analysts as a bid by Kerkorian to muscle GM into such a tie-up in hopes of speeding its turnaround from a year and a half of deep losses.
GM Chief Executive Rick Wagoner has been publicly cool to the idea of forging formal ties with the existing alliance of Renault of France and Nissan of Japan, and many analysts believe that the talks are unlikely to bear fruit.
Kerkorian, who urged the GM board to consider joining the alliance in July, owns 56 million of the automaker’s shares through his Beverly Hills-based Tracinda Corp. Adding 12 million shares would boost his stake to 12%.
“We believe this is a positive as the sphere of Kerkorian’s potential influence will increase and is focused on unlocking/ creating shareholder value,” Merrill Lynch & Co. analyst John Murphy said in a note to investors.
In a letter delivered Thursday to Wagoner, Kerkorian asked for the company’s support of his stock purchase. He suggested that he wanted to boost his stake because he saw that a “strong opportunity exists in a potential alliance between General Motors, Renault and Nissan.”
A copy of the letter was included in a filing Tracinda made with the Securities and Exchange Commission. The filing was required because regulators would need to approve any bid to increase Tracinda’s GM stake to more than 10%.
In a meeting in France on Wednesday during the Paris Motor Show, Wagoner discussed the alliance proposal with Carlos Ghosn, CEO of Renault and Nissan. No details were announced, and the companies said they would continue discussions at least through Oct. 15.
Wagoner told trade publication Automotive News on Thursday that “it’s not logical or responsible to say we must have a partner to recover.”
He said in a statement that GM was reviewing Kerkorian’s letter but declined to comment further.
Kerkorian, who proposed the alliance in frustration over the pace and scope of Wagoner’s plan to restructure the ailing automaker, repeated in his letter an earlier request that GM’s board be given a “strong role” in the discussions. He also urged the board to bring in outside financial advisors to review the proposal.
GM’s newest director, former Chrysler Corp. executive Jerome York, is a longtime advisor to Kerkorian and was voted onto the board in February at Kerkorian’s request. York worked with Kerkorian in the mid-1990s on Tracinda’s unsuccessful bid to take over a then-ailing Chrysler.
In January, just before being placed on GM’s board, York delivered a widely reported speech in Detroit, criticizing GM management for moving too slowly on plans for recovering from a decades-long U.S. sales slide.
Deutsche Bank auto industry analyst Rod Lache said in a note to investors that he believed Tracinda moved in response to indications that GM didn’t favor the proposed alliance.
“We continue to believe that GM management is unlikely to consummate despite the pressure being applied by Tracinda and that Renault-Nissan may ultimately participate in industry consolidation with another partner,” Reuters news service quoted from Lache’s note.
Ford Motor Co., which is undergoing the same type of massive restructuring GM has launched, recently approached Ghosn about considering a potential alliance if the talks with GM fall apart.
Both GM and Dearborn, Mich.-based Ford are shrinking their North American operations in the face of mounting competition from Asian automakers, particularly Nissan’s larger Japanese rival Toyota Motor Corp.
GM, which lost $10.6 billion last year and $3 billion through the first half this year, has cut more than 30,000 factory jobs and taken steps to reduce healthcare and pension costs aimed at shaving $9 billion in annual costs.
The company has said the savings will give it room to invest in new technology and product development. It also is using the savings to back a stepped-up warranty on new models in a bid to win back customers.
Ford, which lost $1.4 billion in the first half this year, has said it will slash 14,000 salaried and 30,000 manufacturing jobs from its North American payrolls in the next few years.
On Thursday the automaker said its Ford Motor Credit Co. financing arm would cut about 2,000 of its 8,600 salaried jobs in the U.S. and Canada as it shrinks from 59 branches to six regional service centers by the end of 2007.
GM shares closed 78 cents higher at $33.06 after touching a 52-week high of $33.64; the stock has risen 70% this year. Shares of Ford, which reported its news after the close of markets, rose 16 cents to $8.16 in regular trading.