Tuesday, October 21, 2008

Kerkorian Throws in the Towel on Ford Investment

Way back in April, when distressed equity investors were still enthusiastic about huge money-making opportunities for beaten-down companies, one man placed of large bet on the future of Ford.  Kirk Kerkorian, the nonagenarian who, until today, still believed in the future of the US auto industry, began accumulating shares in Ford at $8.50.  The Wall Street Journal is now reporting that Mr. Kerkorian is paring back his investment in the auto maker and is pursuing opportunities in the gaming, hospitality and the oil and gas businesses.
With Mr. Kerkorian perhaps the only "smart-money" investor on the planet that thought Ford still had a shot as an ongoing concern, this is obviously not a vote of confidence for the automaker's future prospects.  In fact, the only bullish case to be made for owning the shares is that our government is in a very giving mood, handing out funds left and right to any company with a pulse, and working desperately to keep the US economy from going into a deep and protracted recession.  Perhaps Ford will use its government loans wisely and restructure its business so that it may be profitable again in the future.  Ford's competitors are also suffering so, if anything, relatively speaking, if Ford can keep from going bankrupt first, it has a shot at outperformance.  Unfortunately, that is little consolation to long-term investors who have watched their investment wither away to nearly nothing.     

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