Kirk Kerkorian’s investment company Tracinda wants to pick up 5% of GMs outstanding stock. The massive purchase of 28 million shares at $31 a share would total $868 million and make Tracinda the third largest stockholder when combined with the 3.9% they already own. GM’s stock began a quick ascent as stock jumped to over $32 a share in the process.
Kerkorian’s move spooks some at GM who recall Kerkorian made a similar move in 1990 with the Chrysler Corporation. He bought up almost 10% of their stock and recommended Chrysler pay out some of the $6.6 billion in cash they were sitting on. He then began buying more stock and within in a few years, he began a hostile takeover. The takeover didn’t succeed but he eventually made billions off the deal when Chrysler and Daimler Benz merged.
Thomas T. Stallkamp, who was a top executive at Chrysler when Mr. Kerkorian tried to take over the company, told the Wall Street Journal the bid to purchase more GM shares represents a serious issue for GM’s management. Chrysler’s 1995 takeover battle with Mr. Kerkorian became a considerable distraction for the company’s executives, Mr. Stallkamp said. Later, however, once Mr. Kerkorian had a seat on the Chrysler board, executives other than CEO Robert Eaton rarely saw or heard from him.
All this comes on the heels of a catastrophic quarterly earnings report in which GM reported they’d lost over $1 billion dollars. Also, U.S. automakers are experience sales drop offs because of soaring gas prices. Much of American auto sales came from the sales of sport utility vehicles (SUV) and vehicles like Chevy’s Suburban don’t have as much appeal when it takes nearly $100 to fill up the tank. This fits nicely with the fact that Japanese automakers reported significant increases in their sales during this period.
While Kerkorian’s advisers say he’s not planning on trying to see any changes made, his past history does suggest he’s not afraid to bust a few heads in the business world. The Journal also suggested that GM may start instigating changes just to keep Kerkorian happy.
John Stith is a staff writer for murdok covering technology and business.
