With Ford, patience would have been a virtue for Kerkorian

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From Times Staff Writer Ken Bensinger, who covers the auto industry:

Is this how billionaires become millionaires?

With Ford Motor Co. shares today at their lowest level since the mid-1980s, billionaire L.A. investor Kirk Kerkorian’s decision to load up on the stock in the last few months now looks premature, at a minimum.

In late April, Ford reported a surprising first quarter profit, and confidence in the auto giant soared. Around that time, Kerkorian -- known for his, ahem, activist interest in more than one car company over the years -- announced that his Tracinda Corp. investment firm had acquired 100 million Ford shares, or a 4.7% stake, at an average price of $6.91.

On April 28, Kerkorian stepped up again, making a tender offer to buy an additional 20 million Ford shares for $8.50 each -- a 13% premium over the market price.

Wall Street was, briefly, jubilant. The Wall Street Journal, talking of revivals at privately held Chrysler as well as at Ford, wrote: ‘The turnaround efforts at both companies . . . still have a long way to go. But the bottom line is that Ford appears to have pulled ahead. Mr. Kerkorian’s latest automotive investment is best viewed as proof of that.’

Whoops. On May 22 Ford announced that its long-stated goal of profitability in 2009 had gone up in smoke. Instead, it was cutting production, idling shifts at plants and delaying delivery of its big 2009 model launch, the redesigned F-150 pickup.

The stock, already on a downswing after reaching $8.48 on May 1, sank to $7.16 on May 22, and kept sliding from there. By June 9 -- the day Kerkorian set to complete the tender offer -- the shares were trading for $6.36.

Nonetheless, Kerkorian made good on the offer for 20 million shares at $8.50 each, even though he had the option of pulling out because the market price had tumbled.

And still, he wanted more: On June 19 Kerkorian disclosed that he had purchased an additional 20.8 million shares of Ford on the open market at prices between $6.10 and $6.75, raising his stake to 6.5%. That week, the 91-year-old investor met with Ford leadership, including Chief Executive Alan Mulally, in L.A.

Which brings us to Ford’s report today on its June sales. They were dismal, off 28% from a year earlier. Worse than General Motors’ sales, even. Investors hammered Ford’s stock as low as $4.41. The shares ended at $4.71, off 10 cents for the day and the lowest since 1985.

All told, Kerkorian now has 140.8 million Ford shares worth $663 million. That means he’s down at least $325 million, or almost 33%, on his investment. (A Tracinda spokesperson couldn’t be reached for comment.)

But of course, it’s not a real loss unless you sell. And Kerkorian is nothing if not persistent when he gets involved with auto companies -- as he showed in his attempt to buy Chrysler in 1995 and his failed effort in 2005-06 to force GM into alliances with Renault and Nissan.