Tuesday, December 26, 2006

Sell-off narrows focus to GM recovery

Saturday, December 02, 2006
Sell-off narrows focus to GM recovery
Stake sale sheds specter of Kerkorian, puts fate of automaker on Wagoner, turnaround strategy.
Ken Thomas / Associated Press

WASHINGTON -- 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."

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."

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."

© Copyright 2006 The Detroit News. All rights reserved.


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