Billionaire investor Kirk Kerkorian’s decision to unload his large stake in General Motors Corp. removes — at least for now — the automaker’s leading foil and focuses attention on the company’s turnaround plan, analysts said Friday.
Kerkorian’s investment company, Tracinda Corp., on Thursday reportedly dumped the last block of what was once a nearly 10 percent share of the world’s largest automaker to Bank of America, a longtime lender to Kerkorian. Neither GM nor Tracinda would comment on that report.
Bank of America spokeswoman Melissa Fox on Friday confirmed the bank’s completion of a transaction involving 28 million shares of GM stock, but declined to elaborate.
Kerkorian had tried to spur changes at the world’s biggest automaker during the past 18 months and raised questions about whether its management was moving swiftly enough to restore profitability.
Analysts said his stock sell-off tempers a source of distraction for management and shift attention squarely on how the automaker executes its recovery. GM Chairman and Chief Executive Rick Wagoner has tried to gain some financial flexibility as the company struggles to compete with Asian automakers who have eroded its market share at home.
“Now it’s live or die by Wagoner and GM’s management plan,” said Kevin Tynan, an automotive analyst with New York-based Argus Research. “So if it doesn’t work ... now there’s nobody to blame.”
Analyst: A negative development for GM
Jonathan Steinmetz, an analyst with Morgan Stanley, said in a note to investors that the removal of a “change agent” was a negative development for the company and it was not coincidental that “the pace of change at GM picked up concurrent with Tracinda’s involvement.”
“Having somebody chasing after you often prompts you to run faster than you otherwise would,” he wrote.
GM shares rose 46 cents to close at $29.69 Friday on the New York Stock Exchange. Its shares have traded in a 52-week range of $18.33 to $36.56.
Kerkorian, the 89-year-old former owner of movie maker MGM, tried to foster changes at GM, where he helped install Tracinda adviser Jerome York, a former Chrysler Corp. executive, on the company’s board of directors and successfully proposed the automaker cut its dividend in half.
But other concepts, such as selling the company’s Saab and Hummer brands, were dismissed and Kerkorian’s hopes to ally GM with Nissan Motor Corp. of Japan and Renault SA of France failed to materialize.
York resigned from the board in October shortly after GM jettisoned talks over a three-way alliance. The executive cited “grave reservations” about the company’s ability to compete with Japanese automakers and cited a board room environment unreceptive to “probing much beyond the materials provided by management.”
Sweeping turnaround plan
GM has been engaged in a sweeping turnaround plan, cutting production and costs by securing health care concessions from the UAW and persuading about 35,000 hourly workers to leave under early retirement or buyout plans.
The company is close to reaching a deal on its contribution to labor expenses at bankrupt auto-parts maker Delphi Corp. and completed its sale Thursday of a 51 percent stake in GMAC, its financing arm.
The GMAC deal gives the automaker a major cash infusion. Wagoner called it “an important step to further support GM’s turnaround.”
Gerald Meyers, a former auto executive who teaches at the University of Michigan, said Kerkorian’s retreat was a plus for Wagoner and GM because it halted “a major distraction that was trying to serve the purpose of a big shooter. I don’t think the objectives with Kerkorian were aligned with General Motors shareholders.”
Whether the automaker has seen the last of Kerkorian is another question. Kerkorian tried to buy a controlling stake of Chrysler Corp. during the 1990s and could return to GM if its stock price stumbles, analysts said.
“We believe Kerkorian and York saw tremendous potential value in GM and therefore may be back at a more opportune time,” auto analyst John Murphy of Merrill Lynch wrote in a note to investors.
Tracinda’s sell-off of GM was reported Thursday by The Wall Street Journal, which cited an unidentified person close to the matter. The newspaper reported on its Web site that Kerkorian sold his entire remaining investment in GM — 28 million shares — at $29.95 a share, a transaction worth more than $800 million.