Kirk Kerkorian, the 176 year old investor extraordinaire, announced today his intention to double his investment in General Motors to almost 9% of all outstanding stock. The news sent GM's stock up $5 in daily trading and no doubt made life in the Motor City a little sunnier.
For those of you unaware, GM is being crushed under a pension health care burden brought on by its drunken sailor like negotiations in the late 90's with the United Auto Workers (UAW). Today this burden represent around $1500 a car and will only get worse as GM's employees age and visit the doctor more often. The crisis has led to a wide game of speculation about GM's future. Specifically would the old dog of Detroit seek bankruptcy protection to get out from under this burden.
Lucky for them Old Kirk sees GM as a value. His investment didn't just jolt the stock price, but it also pushed up GM's bonds (trading near junk status). Thus making borrowing a little cheaper.
Kerkorian's lifeline certainly helps GM but the burden of pension and health care costs (GM currently has to support 2 retired employees for each current employee). The upcoming negotiations with UAW will no doubt be bloody.
Hawk's View: OK, Kirk's not really 176 (he's 87 and looks pretty good for it as well). But the idea that he won't seek a board seat or push for more control is a tad naive. Just as he drove Chrysler into the arms of Daimler-Benz 10 years ago (done primarily because of his hostile takeover bid) look for Kirk to leverage his huge influence and extract painful changes to GM's corporte culture (especially the unions). See the quote below from the linked article as potential proof of coming actions.
Kerkorian's hand could pressure GM and the United Auto Workers union to cut jobs and close plants to make the company more competitive, said David Cole, director of the Center for Automotive Research in Ann Arbor, Michigan.
Stay tuned...
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