Kerkorian selling Ford stake

Car biz in crisis

More Videos

AutoNation: More dealers will fold

More Videos

NEW YORK (CNNMoney.com) -- Financier Kirk Kerkorian is pulling out of the stake he took in Ford Motor Co. just six months ago, selling 7.3 million shares at a fraction of his purchase price.

Kerkorian's investment firm, Tracinda, revealed in a filing with the Securities and Exchange Commission Tuesday that he had sold those shares Monday for an average of price of $2.43, and that he was looking to possibly dump his remaining 133.5 million shares, which represent a 6% stake in the automaker.

Ford (F, Fortune 500) shares closed Monday down 7 cents to $2.33. Shares were off another 7 cents in pre-market trading following the announcement.

Ford had limited comment on the filing.

"Questions about specific investment decisions should be addressed to Tracinda," said Ford spokesman Mark Truby. "We're remain confident and focused on our plans to transform Ford into a growing and profitable auto company."

Kerkorian announced in April that he had bought 100 million shares for an average price of $6.91. He then announced a tender offer under which he paid $8.50 a share for an additional 20 million shares. In addition he bought another 22.3 million shares between late April and mid-June at an average price of $6.54 a share, giving his total investment an average price of just over $7 a share.

At the time Kerkorian announced his tender offer in April, he gave Ford management a tremendous vote of confidence, saying that despite the difficult economic outlook he had faith in a turnaround at the automaker.

"Tracinda believes that Ford management under the leadership of Chief Executive Officer Alan Mulally will continue to show significant improvements in its results going forward," said the statement from Kerkorian's firm back in April.

But since April, Ford and other automakers have been hammered by both high gas prices and tighter credit, which made it difficult for consumers to find the financing they needed to buy cars.

The general downturn in the economy, with the rising job losses, also has hit auto sales. Ford saw its September sales fall by more than a third from year-earlier level, leaving its sales for the first nine months of the year down 18% from the same period a year earlier.

"I don't know if Ford's North American operations are even going to profitable by 2010," said Kevin Tynan, auto analyst with Argus Research. "Add to that that we're looking at global automaker weakness into 2010, there's not much hope you're even breaking even on an investment in Ford any time soon."

Kerkorian has been one of the most enthusiastic investors in the U.S. auto industry over the years. He was the largest individual shareholder at Chrysler when it was purchased by German automaker Daimler in 1998, and he tried to buy Chrysler again when Daimler put it up for sale in 2007. It was eventually sold to private equity firm Cerberus Capital.

He also became the largest individual shareholder in General Motors (GM, Fortune 500) in 2005 and 2006, eventually selling his stake when GM management decided against his push for an alliance with Nissan and Renault. His investment in GM had a narrow loss, although dividend income on his shares produced a slim profit over the 19 months he held shares.

Art Hogan, chief investment strategist at Jefferies & Co., said that Kerkorian signalling that he wants out of the auto industry is yet another nail in the industry's prospects in the eyes of investors.

"We've put a lot of nails in that coffin already. But Kerkorian was one of the last believers standing," said Hogan.

Kerkorian disclosed in an earlier SEC filing that he had a $600 million revolving line of credit to purchase Ford shares and that he had pledged his Ford shares, and some of his other holdings, as collateral.

Kerkorian, the primary shareholder of casino operator MGM Grand (MGM, Fortune 500), said he was selling the Ford shares because he sees "unique value in the gaming and hospitality and oil and gas industries."

"Do you need a good excuse to pull out of Ford? What you need is an excuse for getting in in the first place," said Hogan. "It's been in demise for a decade."