Legendary investor Kirk Kerkorian died this week, at the age of 98.
Over his long career, he got involved with the Big Three Detroit automakers on several occasions. It each case, it wasn’t necessarily what management wanted to see.
Kerkorian tried to take over Chrysler in the 1990s and engineered an activist attack on General Motors prior to the company’s bailout and bankruptcy in 2009.
But perhaps his biggest misread was when he amassed a $US1-billion stake in Ford, just as the financial crisis was picking up steam in 2008.
Kerkorian started buying Ford stock in 2008, when shares were trading around $US8. The year before had been fairly flat for Ford, but before the financial crisis, the US auto market had been strong, hitting a peak of 17-million new vehicles sold at one point. If you didn’t see the crisis coming, you couldn’t have predicted that Ford would fall below $US1.50 a share during the year, and that GM and Chrysler would be ushered into Chapter 11.
But it was actually a major misstep, given the impressive judgment Ford CEO Alan Mulally showed in guiding Ford through the crisis, avoiding a bailout, and seeing the company’s stock price recover to double digits.
Still, when you lose over 70% of an investment, it can be hard to keep on buying. There’s catching a falling knife, and there’s getting clobbered by a roof that totally falls in. Kerkorian would have required a time machine to see the US auto industry come through the meltdown and surge to new heights by 2015.
His involvement with the auto industry was never less than interesting, however. And at times scary, for both the investor and his targets.
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