The last time billionaire Kirk Kerkorian knocked on Detroit's door, he tried to force General Motors (GM) into an alliance with Renault-Nissan—an idea that won him no friends in GM's executive suite. In recent months, the 91-year-old has spent $800 million amassing a 6.5% stake in Ford Motor (F). And this time, the reclusive activist investor actually may be welcome.
Over the next few years, Ford, facing slumping sales and planning yet another restructuring, is expected to start burning through its cash. While it now has $29 billion on hand, it could wind up with a dangerously thin cushion in a few years. Ford insiders say Kerkorian may be willing to invest a few billion dollars in the company if it needs cash.
Over the next few years, Ford, facing slumping sales and planning yet another restructuring, is expected to start burning through its cash. While it now has $29 billion on hand, it could wind up with a dangerously thin cushion in a few years. Ford insiders say Kerkorian may be willing to invest a few billion dollars in the company if it needs cash.
Kerkorian, as it happens, is not Ford's only lifeline. The company has $12 billion in credit lines, although tapping them, says Gimme Credit analyst Shelly Lombard, would send "a desperate signal" to Wall Street. And one Detroit executive with ties to the Ford family says Goldman Sachs (GS), banker to the company and the family, could buttress Ford with a "friendly" equity position of several billion dollars. (Goldman declined to comment.)
How this all plays out depends on American car and truck sales. If they pick up substantially by 2011, Ford could quickly benefit from its epic cost-cutting—and generate a sweet return for Kerkorian.
How this all plays out depends on American car and truck sales. If they pick up substantially by 2011, Ford could quickly benefit from its epic cost-cutting—and generate a sweet return for Kerkorian.
by David Kiley and David Welch BusinessWeek
Ford (F) is down to $4.72 in pre-market trading. (Tim)
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