Falling SUV sales
The Guardian – United Kingdom
May 09, 2005
GM’s woes have been widely reported. The company reported a $1.1bn
loss in the first quarter, its worst performance in a decade. It
faces dwindling market share in the US, a worsening product mix as
sales of sport utility vehicles plummet, rising raw material costs
and the soaring cost of providing healthcare for its American workers.
Wall Street, dismissing the comments of Mr Kerkorian’s lawyer, is
anticipating further action.
Among the many suggestions: he could attempt to pressure the company
into selling its profitable finance arm, force his way on to the
board, increase pressure to cut costs, or strong-arm the firm into
handing some of its cash pile back to shareholders. He could also be
just enough of a thorn in the company’s side that it buys his shares
back – delivering him a quick profit.
Mr Kerkorian, born in Fresno, California, to Armenian immigrants,
does have a history of highly active investing.
A boxer and then a civilian pilot for the Royal Air Force during the
second world war, he made his first million in the airline business
when he started out flying charters to Las Vegas after the war.
He built some of the largest hotel casinos in Las Vegas, including
the MGM Grand. He sold his empire there once but returned to build the
MGM Mirage business, in which he still has a controlling interest. The
company earlier this year bought a rival, Mandalay, for $8bn.
He bought and sold the MGM film studio three times. In the most recent
transaction, he sold the business to a group of investors led by Sony
for $5bn.
Mr Kerkorian has already had a brush with the auto industry. In the
mid-1990s he launched a failed takeover bid for Chrysler that left him
with a large stake in the company. When it then merged with Daimler
he made about $3.5bn.
Earlier this year he lost a lawsuit claiming that Daimler’s deal
with Chrysler had robbed shareholders of billions of dollars more by
casting it as a merger when it was really a takeover.
At Blockbuster there is no pretence at civility. Mr Icahn has
attacked the firm’s chief executive, John Antioco, over the size of
his compensation and railed against his strategy to find new revenue
streams to replace the diminishing video rental market.
Mr Icahn, who owns almost 10% of the company, has proposed a slate of
his own directors to be voted on at the firm’s annual meeting. He
hijacked an analyst conference call to discuss Blockbuster’s
first-quarter results and grilled Mr Antioco over his bonuses. He
wants Blockbuster to focus on its core business, pay out huge dividends
and to put itself up for sale.