The fall of An American Automotive
Icon, now you would think that I
would be referring to Ford Motor
(NYSE:
F) but you would be wrong, I am
referring to General Motors (NYSE:
GM).
Back in early 2006 we watched as
General Motors slipped down to
dangerous levels with rumors of
bankruptcy looming through out Wall
Street. The big question was: will
GM be able to pull out of the mess?
especially with Kirk Kerkorian and
his Tracinda Corp selling a chunk of
their position late in 2005,
approximately 12 million shares.
The stock dropped under $20 a share
and things were not looking good for
GM, at least not on the surface. But
Kerkorian was not done with General
Motors, apparently he sold his
position to take advantage of a tax
loss but he did jump back in and
reacquired his position and then
some.
General Motors then announced a
restructuring plan and at the time
Kerkorian made it clear that he
wanted to be a part of this plan to
bring the automotive giant back to
its former glory. Rick Wagoner
obviously sat in a position that no
CEO envies, and he had some tough
decisions ahead of him.
The Kerkorian stock reacquisition
and the turnaround plan gave a nice
boost to GM stock and gave hope to
investors that the company would
reemerge from the abyss. So in the
middle of the stock climbing from
the $19 range in February 2006 to a
high of $36.56 not too long ago,
hitting a point that they have not
seen since early 2005, they
appointed Kerkorian’s right hand man
Jerry York to the companies board.
In my opinion his experience and
input was a necessity for GM, only
if it was embraced.
GM sold off a majority stake in
their GMAC Commercial Holding Corp to
an investor group led by affiliates of
Kohlberg Kravis Roberts & Co., Five
Mile Capital Partners, LLC, and
Goldman Sachs Capital Partners, they
acquired a 78% interest in the
division for $1.5 billion.
Now just to continue with the recent
history lesson of General Motors,
the company has faced union ordeals
and various other obstacles in 2006
including a potential deal with
Carlos Ghosn's Nissan Motor Co. and
Renault SA. This is a deal that
Kerkorian had pushed for and when it
was dismissed by the board of
General Motors, well that led to the
departure of Jerry York.
This should have been a red flag for
any investor in General Motors,
because York in the mix gave the
company hope to regroup after an
over $10 billion loss in 2005.
Since his departure the stock has
slipped down as word got out that
Kerkorian unloaded more stock than he
did in 2005 but this was different
than in 2005 as he sold it at a profit
and reinvested it in MGM Mirage (NYSE:
MGM). That was a sign that Kerkorian
was potentially done with General
Motors for the moment.
I’ve spoken about General Motors on
several occasions being a company that
could rise from the ashes and regain
the glory of being an American
Automotive Icon, with the help of Kirk
Kerkorian. But with the departure of
Jerry York, the stock dropping below
the $31.50 plane was enough for me to
speculate that Kerkorian may not be
coming back as he did earlier this
year.
Well as of early this morning it seems
as though Kerkorian not only trimmed
his position but unloaded his entire
holdings in General Motors. Some
analyst may view this as the
elimination of a corporate distraction
but I see it as the beginning of
potentially being a downward spiral,
which could push the stock back into
the low $20 range if not into the high
teens.
Keep in mind that Kerkorian may be
just sitting on the sidelines waiting
for a more opportune time to build his
position once again but I feel that
would be in the teens and not in the
$20 range.
I will be the first to say that I
would like nothing more than to see
General Motors rise as a company once
again but at this point it may be some
time coming before that occurs.
Investors in the automotive sector
that are looking for a turnaround
situation may want to keep a close eye
on Ford Motor (NYSE: F) as Bill Ford
has become a realist and put Alan
Mulally at the helm of Ford. Granted
they mortgaged the entire company to
raise $18 billion but it was a
necessary evil and investors only need
to look at Mulally’s track record to
keep their faith level in Ford high.
Ford’s turnaround could potentially
make the stock a teenager in 2007 and
put the company back in the saddle as
an automotive leader not only in the
United States but globally.
Louis Victor
NAMC Newswire
888-463-9237
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