Kirk Kerkorian apparently thinks it’s the former with General Motors (GM/NYSE). By now, you’ve heard the news breaking late yesterday afternoon that Kerkorian’s Tracinda Corp. has boosted its stake in GM to 9.9% of the company.
Again.
Recall that Kerkorian reduced his previous 9.9% stake to 7.8% just before 2005 came to a close. Apparently for tax purposes, although more than one financial observer suspected it might just be the beginning of Kerkorian dumping his shares. Now we know that’s NOT the case. Now we know that Kerkorian is back into GM for the long haul.
And to what end?
Well, people can only speculate. Which they no doubt will. I said here that I wouldn’t be surprised if Kerkorian didn’t repurchase GM shares because his “reduced” holding was still 7.8% of the company, leaving him the 3rd largest shareholder -- and enough of a platform to work from.
Loomis Sayles portfolio manager David Sowerby was quoted by Dow Jones Newswires as saying Kerkorian's move reflected his confidence in GM. "Incrementally, it's a positive, because you have the re-commitment from a deep-value investor," he said.
Whether GM is a deep value play or leaves shareholders in deep doo-doo remains to be seen. Anyway, Tracinda made no mention of why it purchased more GM stock in yesterday’s filing. No reason to expect it to. Jerry York, Kerkorian’s advisor on GM matters, made Tracinda’s case for change at the recent auto show. That may the first and last time Kerkorian “goes public” on what he thinks the company needs to do. Or it could be the first of many.
What we do know is that Kerkorian and York have talked with Rick Wagoner and GM’s management in the past and are certainly continuing to do so. Behind the scenes talks are still going on with the UAW. It may all seem mysterious to journalists and market watchers. I certainly have no idea what the inner workings are in the boardroom of GM or Tracinda.
Then again, I don’t expect all the parties to negotiate in public. Except when it is to their advantage or when they feel public posturing is called for.
Yet it seems obvious what GM’s destination is: to operate as a much smaller company inside North America (remember the International operations are in good shape). How much smaller? Small enough to make its North American car and truck business profitable.
The only question is how much you-know-what must hit the fan to reach that point.
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