Detroit
Kerkorian’s Increased Stake Could Dent Fords’ Control
By MATTHEW DOLAN
June 7, 2008; Page A2
wsj

Billionaire investor Kirk Kerkorian is expected to have an increased stake
in _Ford Motor_ ( mp;symbol=F) Co.
on Monday, when his tender for 20 million shares expires.
The additional shares would give his Tracinda Corp. a holding of 5.5%, up
from 4.7%. The closing of the offer — at $8.50 a share, a 40% premium —
potentially puts the famously forceful shareholder at odds with the Ford family.
The family owns a smaller stake, just 3%, but has 40% of the voting rights,
a situation Mr. Kerkorian may tolerate only as long as Ford’s turnaround
continues to show clear progress.
Mr. Kerkorian and trusted lieutenant Jerome B. York want Chief Executive
Alan Mulally to take tough steps, such as killing the ailing Mercury brand —
a move some Ford family members have fought in the past.
The family could even come under pressure to give up some of their votes, if
Ford’s already precarious position worsens.
Reeling from a steep decline in truck sales, Ford now is unsure of when it
will return to profitability. If its finances buckle, it may have to seek a
capital injection.
Mr. Kerkorian would be one possible benefactor, but any help would probably
come with a price, such as a change in the voting structure.
So far, Mr. Kerkorian and his team have had only praise for Mr. Mulally and
his turnaround plan, despite the company’s retreat from promised pro
fitability by 2009.
Mr. Mulally’s stewardship at Ford has come at a wrenching time for the
industry, as sales volumes have fallen, and, more recently, consumers have
turned away from gas-guzzling trucks and sport-utility vehicles. As a result,
the Dearborn, Mich., company has cut its work force by more than 40,000,
borrowed heavily and shed noncore brands such as Land Rover and Jaguar to
raise needed cash that could bring more popular car models to market.
Last week, Ford began what could be seen as the third phase of its Way
Forward turnaround plan, based on only breaking even in 2009. To do so, the
auto maker says it would need to trim another 15% of the budget for its
salaried work force by Aug. 1, leading to the likely layoff of more than
2,000 workers.
Other cost-saving measures — shift reductions, plant closures and selected
buyouts of union workers — remain on the table.
Despite strong headwinds in the auto sector, including gasoline at more than
$4 a gallon, Tracinda continues in the near term to back Ford’s strategy.
The original tender included a clause saying it reserved the right to pull the
offer if Ford’s stock price declined by 10% or more from its May 8 closing
price of $8.20. But the Beverly Hills, Calif., company, which is wholly
controlled by Mr. Kerkorian, declared it would not employ that escape route
— in a sign of confidence in the future value of the company.
Still, Mr. Kerkorian struck a similarly conciliatory tone with _General
Motors_ ( mp;symbol=gm) Corp. and
Chrysler LLC before he grew dissatisfied with the direction of those auto
makers and insistent about more change.
The next few weeks and months could show how well the team of the activist
investor and the company’s management co-exist. According to regulatory
filings, company Chairman William C. Ford Jr. and Mr. Kerkorian’s lawyer, Terry
Christensen, plan to meet for the first time soon after the tender offer
expires.
Write to Matthew Dolan at _matthew.dolan@wsj.com_
(mailto:matthew.dolan@wsj. com)