Kerkorian boosts stake in Ford

Kerkorian, who previously held a nearly 10 percent stake in General Motors Corp and made a failed bid for Chrysler LLC last year, began amassing Ford shares April 2.

Tracinda holds 100 million Ford shares and announced on Monday that it planned a cash tender offer to acquire 20 million more shares, or about 1 percent of the stock, at $8.50 per share, or a 13.3 percent premium over Friday's close.

Ford shares and bonds shot higher after the announcement.

Tracinda said it had been following Ford closely since the automaker released fourth-quarter results in January and it believed the Dearborn, Michigan-based company was starting to achieve traction in its turnaround efforts.

That expectation was reinforced by Ford's announcement last week of a first-quarter profit that surprised Wall Street analysts at a time when U.S. auto sales are slumping, Tracinda said.

Tracinda said it believes that Ford management, led by Chief Executive Alan Mulally, would continue to show significant improvements in financial results.

Ford said the Kerkorian investment represented an endorsement of its turnaround strategy and noted that anyone was free to acquire its shares on the open market.

"We welcome confidence in Ford and the progress we are making on our transformation plan," Ford Executive Chairman Bill Ford and Mulally said in a joint statement.

"The Ford team remains focused on executing our plan to transform Ford into a lean global enterprise delivering profitable growth for all," Ford and Mulally said.

The Ford family controls almost 40 percent of the voting power at the automaker through a separate class of shares established when the company went public in 1956.

Ford lost $2.7 billion in 2007 and $12.6 billion in 2006. It has forecast a return to profitability in 2009 after slashing costs in the U.S. market by cutting jobs and closing plants.

FORD'S DIRECTION

Kerkorian has a long record as an interventionist investor in Detroit and his ownership of GM stock came with a short stint by his adviser, Jerry York, serving on GM's board.

Kerkorian's endorsement of Ford's direction under Mulally, a former Boeing Co executive hired in 2006 to take charge of Ford's turnaround, marked an apparent shift from the billionaire investor's more recent confrontational approach to the management of major automakers.

Kerkorian built up an almost 10 percent stake in GM in 2005, a move that gave him leverage to place his representative, York, on the automaker's board.

But Kerkorian and York, who had been seen as taking aim at GM Chief Executive Rick Wagoner, failed to broker a tie-up between GM and Renault-Nissan or to convince GM to spin off brands such as Saab and Hummer.

Kerkorian sold his 9.9 percent stake when GM rejected his proposals.

York remains an adviser to Kerkorian but it was not clear how active he would be in Tracinda's Ford investment. Tracinda's statement did not say whether Kerkorian would be seeking a seat on Ford's board.

Erich Merkle, director of forecasting for consulting firm IRN Inc, said the Kerkorian move was an indication that investors see Ford as undervalued over the long term.

"Auto sales are going to be sluggish in the second and third quarters, no question about that," Merkle said. "But Ford is starting to become profitable once again and in the long term, I think the company will return to profitability in 2009. If it wasn't for the economic malaise we're in right now, I think Ford would have returned to profitability this year."

Ford shares soared more than 10 percent to $8.29 in early New York Stock Exchange trading. The shares have traded in a 52-week range of between $9.70 and $4.95.