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2008年10月22日 星期三

Investor Sheds a Major Stake in Ford

Investor Sheds a Major Stake in Ford

By BILL VLASIC
Published: October 21, 2008

DETROIT — One of the biggest boosters of the American auto industry said Tuesday that he was bailing out of his large stake in the Ford Motor Company — a stinging no-confidence vote that raised the anxiety level in this city over the deepening troubles of the Big Three car companies.

By starting to sell off his $1 billion bet on Ford, an investment that is now worth less than $300 million, the financier Kirk Kerkorian joined the growing ranks of investors who have soured on Detroit’s prospects because of plummeting sales and mounting losses.

Mr. Kerkorian’s abrupt decision to back away from Ford comes just six months after he began building his stake. It also follows an effort by the private equity firm Cerberus Capital Management to try to sell Chrysler to General Motors after spending $7.4 billion a year ago to acquire the smallest of the Big Three automakers.

G.M. and Cerberus need banks and other investors to provide financing for the deal. But the tenuous state of the industry has made prospective investors, so far, hesitant to back the merger.

“Conditions in the industry are so perilous they are scaring away even the most fearless investors,” said John Casesa, a principal in the automotive consulting firm Casesa Shapiro Group in New York.

The stocks of the two publicly traded American auto companies have plunged over the last year — G.M.’s has fallen more than 80 percent, and Ford’s is down 75 percent.

With the specter of bankruptcy now hovering over the Big Three, the likelihood is increasing that the companies will appeal to the federal government for more financial assistance.

“It’s reaching a point where we’ll have to decide if we’re willing to let the U.S. auto industry fail,” said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. “It depends on the urgency that the government feels to save these companies.”

The failure of General Motors, Ford and Chrysler would have far-reaching economic and social consequences.

Together, the automakers employ more than 200,000 workers in the United States and provide health care and pensions to more than a million Americans. In addition, their operations are lifelines to 20,000 auto dealers and countless suppliers, and the source of major tax revenue to states and local governments.

Investors have been fleeing the stocks of G.M. and Ford since the spring, when high gas prices shifted consumers’ tastes away from the big sport utility vehicles and pickups that were Detroit’s most profitable offerings.

Since then, a weakening economy has frightened many shoppers away from dealer showrooms, leading to billions of dollars in losses for the car companies in the weakest auto market in 15 years.

The financial crisis on Wall Street has accelerated the downturn. Because of tighter credit standards by the automakers’ finance arms and other lenders, some prospective new-car buyers have been unable to get loans, further choking off sales.

Overall auto sales have slumped 12.8 percent in the first nine months of the year, but G.M. sales have dropped 17.8 percent, Ford’s by 17.4 percent and Chrysler’s by 25 percent.

The decline appears to be accelerating this month, prompting analysts to further cut their forecasts for the industry.

The research firm J. D. Power & Associates recently predicted that United States sales this year would total 13.6 million vehicles, a decline of 16 percent from a year ago, and said 2009 sales could fall as low as 13.2 million.

G.M. lost $18.8 billion in the first six months of the year, and Ford lost $8.6 billion. Chrysler, because it is privately owned, does not report its financial results.

The losses, however, are not as alarming to analysts as the rate at which G.M. and Ford are using up their cash reserves.

Both companies are said to be burning through more than $1 billion in cash a month. Despite almost constant cuts in production and jobs, the automakers are unable to reduce costs fast enough to offset declining revenue.

G.M. and Ford have repeatedly stated that they do not consider bankruptcy protection as an option. And some analysts, for now, say the talk of Chapter 11 filings is overblown.

“General Motors and Ford are both likely to survive, but we now see higher 2009 cash burn rates,” said a research report published Tuesday by JPMorgan Securities.

The cash crisis could prompt the auto companies to seek help from the federal government after the Nov. 4 presidential election.

Washington recently financed a $25 billion loan program to help the automakers develop fuel-efficient vehicles that meet new federal mileage standards.

Some industry executives, declining to be named, said they expected Detroit to request more financial aid.

Senator Carl Levin, a Democrat from Michigan, said Tuesday that Washington should be prepared to help the auto industry in the same way it rescued the banking industry.

“I would think that most people understand the importance of the automobile industry as a whole to the industrial base,” Senator Levin said. “Clearly we’ve got to be ready to act if and when the situation gets to such a point that the additional support needs to be available.”

Executives at G.M. and Cerberus, Chrysler’s parent, say they believe they can help their two companies avoid such a fate by realizing substantial savings as a single entity. In addition, their combined cash hoards could help them through an economic downturn while they bleed cash. If a merger does occur, the combination will most likely result in thousands more job cuts. The talks, which began more than a month ago, were said to be continuing Tuesday, according to people with knowledge of the discussions.

At Ford, the sell-off by Mr. Kerkorian underscores how quickly the industry’s fortunes have spiraled down. The 91-year-old billionaire investor had previously amassed major stakes in G.M. and Chrysler, only to dump his holdings after conflicts with management.

But Mr. Kerkorian and his top deputy, Jerome York, appeared to have a much higher opinion of Ford’s prospects when he first began accumulating its shares in April through his Tracinda investment arm.

“Tracinda believes that Ford management under the leadership of Chief Executive Officer Alan Mulally will continue to show significant improvement in its results going forward,” the company said in a federal filing.

Mr. Kerkorian and Mr. York were said to be even more enthusiastic about Ford’s outlook after a meeting in June with Mr. Mulally and William C. Ford Jr., Ford’s executive chairman and leader of its founding family.

But the steep slide in Ford’s stock has made Mr. Kerkorian rethink his commitment.

On Tuesday, Tracinda said it had sold 7.3 million Ford shares for $17.7 million, and “intends to further reduce its holdings of Ford common stock, including the possible sale of all of its remaining 133.5 million shares.”

Mr. Kerkorian currently owns a 6.09 percent stake in Ford, worth about $290 million at Tuesday’s closing price of $2.17.

Ford executives were said to be stunned by the move. Analysts speculated that the abrupt resignations last week of two of Ford’s outside board members may have contributed to Mr. Kerkorian’s waning confidence in the company.

A Ford spokesman, Mark Truby, declined comment on Mr. Kerkorian’s decision.

“Questions regarding Tracinda’s investment decision should be directed to Tracinda,” Mr. Truby said. “We remain confident in and focused on our plan to transform Ford into a lean global enterprise delivering profitable growth for all.”

In its statement, Tracinda said “current economic and market conditions” prompted its move to reallocate resources from Ford to Mr. Kerkorian’s interests in the casino and oil and gas industries.

Nick Bunkley contributed reporting.

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