A Kerkorian scenario: Loosening Ford family's grip

Kirk Kerkorian

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(Fortune) -- For those keeping score at home, Kirk Kerkorian turns 91 on June 6. He is not, as the joke goes, a long-term investor. But he certainly is an active one.

Kerkorian made most of his billions investing in Hollywood movies and Las Vegas real estate. When he got to his 70s, he became interested in Detroit. He has taken several stakes in Chrysler, made a run at GM (GM, Fortune 500) in 2005, and now he's gotten interested in Ford.

Kerkorian's investment vehicle, Tracinda Corp., started buying Ford (F, Fortune 500) stock on April 2nd, and now holds 100 million shares. Monday it announced it intends to make a tender offer for another 20 million shares.

What's Kerkorian up to? In his previous adventures, Kerkorian has acted as an agitator, demanding companies take various steps to reward shareholders, like selling assets and boosting dividends, so that he can dispose of his holdings at a profit.

Given Ford's parlous state these days, however, trying to maximize shareholder value in such a way would be like squeezing water out of a stone. Despite a profitable first quarter, Ford expects to lose money for the rest of the year - its third consecutive annual loss. The turnaround now being engineered by CEO Alan Mulally isn't expected to start gaining traction until 2009.

No, Kerkorian probably has something more strategic in mind that just stripping and flipping, and he likely plans to exploit an opening that hasn't existed before but that offers lots of opportunities: a rift in the Ford family.

The family has maintained a tight hold on the company since its founding in 1903, and even managed to keep 40% of the voting shares after Ford went public in 1956.

But subpar financial results during scion Bill Ford's five-year tenure as CEO have produced dissension in the family. It saw the value of its holdings cut by more than half-a-billion dollars during Bill's tenure and the dividend eliminated.

A boutique Wall Street advisory firm, Perella Weinberg, was brought in to advise family members about maximizing the value of their holdings. Despite what has been termed "a spirited debate," no change was made in the status quo.

If Kerkorian can rattle the Ford family the way that Rupert Murdoch rattled Dow Jones' Bancroft family - eventually gaining control of the Wall Street Journal - he may get an opportunity to shake things up. As analyst Himanshu Patel of JP Morgan wrote Monday: "With the value of their Ford shares now significantly lower than a few year ago, we think the family's desire to maintain voting control at all cost is now considerably lower."

Whether that is in fact the case will be seen in coming days, after hurried family meetings and telephone conferences. One argument the family is sure to hear is that the turnaround is proceeding on schedule, so why mess things up? Management can only be distracted by having to deal with Kerkorian, and what is needed most at this critical time is focus.

So beyond merely holding out for greenmail and being paid to go away, what might Kerkorian do as an investor in Ford?

First, he could agitate for a seat on the board to represent Tracinda's holdings. From that position, he could spur Ford to accelerate its turnaround, by cutting costs more aggressively, rationalizing the distribution system, and moving faster on new model development.

Second, he could push for a break-up of the company. Not long ago, the family is said to have looked seriously at reorganizing Ford as a holding company, so that profitable pieces like Ford of Europe could be maintained, and perennial money-losers like North America spun off. Kerkorian might go down that road again.

Finally, he could nudge Ford in the direction of an alliance. Renault-Nissan's Carlos Ghosn is still eager for a linkup with a North American partner. And some in Detroit believe it would make sense for Ford to join with Chrysler. Eliminating competition would allow the remnants of both companies to prosper.

One thing for sure: Life is never boring with Kerkorian around. This 90-year-old could have a lot to say about determining the future of the 105-year old Ford Motor Company.