Kerkorian Nixes Buying More GM Stock

Kirk Kerkorian bought a pretty big stake in General Motors a while back, and his participation in the ownership of the company got rave reviews from many. He’s the kind of guy to can turn things around, sometimes. Friday, he announced he wasn’t going to buy any more stock in the company, and his advisor, Jerome York, has quit GM’s board. It isn’t a vote of no confidence just yet, but it’s getting there.

Mr. Kerkorian had been pushing GM to form an alliance with Nissan and Renault, which already share a CEO, Carlos Ghosn. Mr. Ghosn has not kept it secret that he wants a North American ally. Mr. Kerkorian was the lead shareholder at Chrysler when Daimler-Benz bought it to form DaimlerChrysler. His thought was, that which worked once could work again.

No dice, this time. Discussions between GM and Mr. Ghosn’s companies fell apart Wednesday. Reports from people in the room said Nissan and Renault didn’t want to pay GM to join their entente. Since GM is losing ten figures every quarter of late, it could do with the cash. However, Nissan and Renault don’t see much point in paying money to help a sick company get better. Maybe the idea is to let GM falter some more and then get a better deal.

According to SEC filings and media reports, Mr. Kerkorian had intended to add 12 million to the 56 million shares of GM he currently owns. That would have taken him from a 9.9% ownership stake to over 12%. That won’t happen now, and the market reacted to the news of the talks ending and its fall out by knocking 6% of GM’s market value.

What is more serious is the resignation of Mr. York. Deciding that 9.9% is enough rather than 12% is one thing. Pulling one’s board member signals a surrender of hope. Given that Mr. Kerkorian holds so much stock, it will be tricky for him to divest himself of it, but over time, he can do it. The departure of Mr. York suggests that that will be the next step. Mr. Kerkorian appears to believe he can’t help GM. And if he can’t, one wonders if anyone can.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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