Ford (F) management believes that Kirk Kerkorian and his mob of friends are hanging around the car company because they think CEO Alan Mulally is doing a fine job. Ford may want to have a look. All the new guys have blackjacks in their suit pockets.
Kerkorian now has over 6% of the Ford common. He knows as well as anyone that the Ford family has voting shares which effectively control the company. He also knows that maintaining the car firm’s operations in untenable. Ford does fairly well in Europe and Latin America, but the drag from its US auto business is eating cash much faster than the company’s management could have imagined. With a line-up of SUVs and pick-ups still dominating the product mix at the operation, unit sales could drop off another 15% to 20% this year.
Ford cannot cut expenses fast enough or far enough to offset that level of carnage.
Like many large families several generations removed from a founder, most of the fruit of Henry Ford’s loins does not give a damn about what happens to the company. They have seen the value of their trust funds lose a third of their value recently. Even if they have not been educated at Ivy League schools, they know that is about to get worse. Rich people hate to get poor.
If Ford’s fortunes deteriorate as the year wears on, the share price is going to sell down and the company may need to raise more money. That kind of dilution would be ruinous. Wall St. is gambling that there will be further big drops in Ford. It is the most shorted company on the NYSE.
All Kerkorian has to do is wait now. As Ford’s world falls apart, he is in a position to help the company and the Ford family unload the company as a fairly nice profit. VW has said it would like 15% of the US car market. It cannot get their on its own. Renault and Nissan, already blood brothers, would like a larger presence in the US as well. Any of these companies could take major costs out of Ford’s management, marketing, and development costs.
Kirk has a "For Sale" sign on Ford. The people inside company headquarters just don’t know it.
Douglas A McIntyre
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