Billionaire investor Kirk Kerkorian has already sold a large part of his $1 billion stake in Ford Motor and may sell his remaining shares in the days and weeks to follow, according to The International Herald Tribune.
The move to dump shares in Ford Motor may lead to a bustling sell-off in Chrysler and General Motors as well. Investors simply have no confidence in the American auto industry following dramatic declines in share prices and a seemingly ingrained inability to keep up with foreign competition. Ford, General Motors and Chrysler are heavily invested in these once popular vehicles because they represent massive profits that smaller cars simply cannot produce. As these model lines die, the companies seem to be dying with them.
Despite falling fuel prices (which are not as low as they seem) and incredible incentives packages, consumers seem to have finally come to terms with their addiction to big, expensive SUVs and light trucks. As Detroit continues pumping out vehicles that consumers refuse to purchase – while dragging its feet in transition to efficient vehicles similar to those of its competition – Detroit’s auto industry continues to hemorrhage cash at stupendous rates.
The credit ratings of Ford, GM and Chrysler have been slashed several times in the last year, making companies and banks uneasy about lending any funding to the auto giants for fear of losing their investments. Individual investors – from billionaire Kerkorian to average citizens – have dumped their shares in droves, driving down share prices to near record lows (see: Ford, GM). Cerberus Capital Management, which last year bought the Chrysler division from Daimler for $7.4 billion, is now seeking to re-sell the company to General Motors in a deal which will likely bring pennies on the dollar.
Even the prospect of federal funding cannot stem the bloodletting. Congress approved a $25 billion package for the Detroit Big Three but the extent of miscalculation, poor management and strong foreign competition will likely render any amount ineffective.
American companies are not the only ones suffering, auto sales across the board are down for all makes and models. Unfortunately, the worst of this sales slump is firmly grounded in Detroit. A perfect storm of bad management, lack of government encouragement and intervention, and strong foreign competition has completely undermined a once mighty American industry. The current shock may be one from which the automakers never recover.
Source The International Herald Tribune:
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The billionaire investor Kirk Kerkorian has sold part of his stake in Ford Motor and may divest himself of his remaining shares in another sign of slumping investor confidence in the ailing American auto industry.
... His decision to give up on Detroit follows one by the private equity firm Cerberus Capital Management to try and sell Chrysler to General Motors, after spending $7.4 billion a year ago to acquire the smallest of the Big Three automakers.... "Conditions in the industry are so perilous they are scaring away even the most fearless investors," said John Casesa, principal in the automotive consulting firm Casesa Shapiro Group in New York. |