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 Reading Kirk Kerkorian's comments backing Ford Motors Co. and its CEO Alan Mulally, it is hard not to think of the famous fable "the scorpion and the frog," which tells of the arthropod who goes back on its word and uses its stinger, explaining "I'm a scorpion; it's my nature." And those sorts of thoughts should be enough to give Mulally and Ford pause despite all of the automaker's takeover defenses and its considerable progress in recent quarters.
Kerkorian said Monday his Tracinda Corp. intends to make a $170 million investment in Ford, a buy that would give him a 5.6% stake in the automaker. The investor is no stranger to the auto industry, having bought into Chrysler Corp. in the 1990s and General Motors Corp. three years ago. But this time, Kerkorian says he comes in peace. Though he pushed for change at both Chrysler and GM, he said in a statement he has been monitoring Ford's turnaround efforts since the end of last year and believes that "Ford management under the leadership of chief executive officer Alan Mulally will continue to show significant improvements in its results."
Indeed Ford's results, highlighted by its surprise $100 million first-quarter profit announced last week, have been impressive. And the endorsement of perhaps one of the industry's shrewdest investors is a feather in the cap of a management team that took over what was widely considered the sickest of Detroit's Big Three and has implemented a turnaround plan.
But there are headwinds ahead, with Mulally calling the rest of 2008 "a challenge" as automakers deal with high fuel prices and a slowing U.S. economy. One wonders how long Kerkorian will remain a management cheerleader should the stock turn south, and what plans he might have up his sleeve to deal with the Ford family's controlling 40% voting power.
Kerkorian could remain a passive investor, ready to ride the ups and downs of the cyclical auto industry and watch as Mulally and his team deals with changing consumer tastes and future competition from ultra-low-cost manufacturers in China and India. But it seems unlikely. He is Kirk Kerkorian; it's his nature. - Lou Whiteman
See TheDeal.com story on Kerkorian's investment in Ford See TheDeal.com story on Ford's strong quarter Categories Deal Video
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