Billionaire’s Tracinda Group to Buy 28 Million Shares

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DETROIT ( -- Auto analysts are buzzing today after Tracinda Corp., the private investment arm of billionaire Kirk Kerkorian, has offered to buy 28 million shares of troubled General Motors Corp. at $31 a share. That price is more than 10% over the auto giant’s May 2 closing stock price.

Tracinda in a statement said its planned $800 million-plus stock buy was an investment.

In a statement issued late today, the automaker said, “GM typically does not express a view on specific investor activity. GM's board and management are committed to enhancing shareholder value for all of our investors.” The automaker acknowledged Tracinda’s public statement that the acquisition is solely for investment purposes.

The good news
“The good news is [Mr. Kerkorian is] an interested party, he has a lot of money and he likes what he sees,” said Jim Sanfilippo, executive vice president of Omnicom Group’s auto consultant AMCI. He called the news “fascinating.”

“Look at his pattern,” he said, referring to Mr. Kerkorian’s investments in the defunct Chrysler Corp. and its successor, Germany’s DaimlerChrysler AG.

Mr. Kerkorian, 87, became Chrysler Corp.’s biggest investor in the 1990s, flubbed a 1995 takeover attempt with ex-Chrysler chairman Lee Iacocca, but successfully pushed for a seat on its board. The casino king is appealing a court ruling last month that dismissed his $1 billion lawsuit against DaimlerChrysler over Daimler Benz’s 1998 Chrysler takeover.

In recent weeks, GM reported a global first-quarter loss of $839 million, excluding special items, compared with a profit of $1.2 billion a year ago.

Successful turnarounds
Mr. Kerkorian’s planned investment in GM “could be what GM needs to force change more rapidly,” said another auto consultant who asked not to be named. The consultant said the auto industry’s successful turnarounds, including Nissan and Chrysler, were led by new management from the outside. “The key is to bring in a big, powerful guy from the outside.”

The move is probably Mr. Kerkorian’s “last hoorah,” the consultant said. “ I think Kerkorian believes there’s value there, but how much of it is his ego and how much does he think he can extract from GM?”

’Heading downhill quickly’
Susan Jacobs, president of her own auto consultant, isn’t sure Mr. Kerkorian could shake things up as fast as GM needs. “GM is at the point where is heading downhill quickly and has much further to drop before it stabilizes and rebounds,” she said.

The automaker needs to “rationalize its whole planning process, by either cutting capacity sharply or cut prices sharply,” Ms. Jacobs said. “I don’t see GM moving quickly in either direction.”

April vehicle sales down 7%
GM yesterday reported April U.S. vehicle sales slid by 7% from a year ago, with trucks off by 17% but cars up by 7.5%. Sales in the first four months of 2005 dropped by 4.6% to 1.4 million. The carmaker also announced yesterday that second-quarter production forecast for North America remained unchanged at 1.25 million vehicles, with a mix of 431,000 cars and 819,000 trucks -- pickups, minivans and SUVs. In the year-ago period, GM said it produced 1.389 million units: 543,000 cars and 846,000 trucks.

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