Kerkorian Unloads all of GM

Last week I speculated Kirk Kerkorian was unloading his position in General Motors (GM/NYSE).

Now he has.

The Wall Street Journal has an excellent feature article on this development -- and recaps the entire Kerkorian-GM saga.

Kerkorian's Tracinda Corp. reportedly sold its remaining 28 million shares to the Bank of America for $29.25 a share. The previous two stakes sold -- 14 million shares each -- were in private transactions for $33 and $28.75 a share, respectively.

This news, along with the GMAC deal closing, clearly has CEO Rick Wagoner and GM management popping corks and howling with delight. Whether their celebration will be short-lived or not remains to be seen.

For this GM shareholder, nothing changes. I am still holding my stock. I don't know what the stock price will do in the near term, but am confident it will appreciate over the long term.

I've held the stock for less than two years, though with the relentless GM-is-falling-and-it-can't-get-up news reporting it seems like forever. Let's see what the price turns out to be in 2007, 2008, 2009.

My bet is that the road for GM and its shareholders will be much smoother then.

Comments

[bob]

It seems to me that GM's future is actually quite clear. The company will continue to fight to maintain market share. Management will try to use financial engineering and downsizing to mitigate the effects as their market share erodes. The company's quality is almost always below a number of foreing competitors. Their health and pensions costs per car are considerably higher than their foreign competitors. Without massive restructuring of the entire culture what is their to like in this? Without Kerkorian what is the force that will move GM? After a 30+ year decline why do you think it is suddenly going to turn around?

I have read your arguments for holding GM but you just seem to be contrarian. It can certainly be a profitable strategy but do you actually have any sort of argument for why the rest of the market (those who don't own or are underweight GM) is wrong?

[Jonah Williams]

Not sure if trackback is working, so...

http://www.31contracts.com/2006/12/01/on-kerkorian-and-losing-from-the-top/

Best,
Jonah

[John]

bob: I bought GM before Kerkorian and never saw his involvement as the key to any turnaround. I also never felt GM would ever "suddenly turnaround." Quite the opposite. I've posted repeatedly since April 2005 that GM is a huge supertanker of a company and that it would never turn on a dime.

GM could rid itself of its liabilities by filing Chapter 11. That move would be a death blow to the UAW. They know that and, unless they want to commit suicide, they'll play ball with Wagoner & Co. I think Wagoner doesn't want to go the bankruptcy route because he sincerely wants to turn the company around and work with the union. But even if that's not the case, Chapter 11 would wreck havoc with GM's dealers and Wagoner is loyal to them.

My rationale for owning GM has nothing to do with it overtaking Toyota, etc. I think the company is undervalued now, based upon its stock price.

[John]

Jonah: Great stuff. As they say, that's what makes a market. ;-)