Billionaire investor Kirk Kerkorian sold almost $18 million of Ford shares at a deep loss and could liquidate his remaining 6 percent stake in the struggling automaker, after a six-month run where he became Ford's largest outside investor.
Tracinda Corp, Kerkorian's investment company, said on Tuesday it would reduce its stake in Ford Motor Co and was working with an investment bank on the potential sale of all 133.5 million Ford shares it still holds.
Tracinda's investment in Ford had been seen as a vote of confidence in the No. 2 automaker and its turnaround strategy, and Ford shares tumbled nearly 8 percent on the news.
Ford said it remained committed to its restructuring plan under Chief Executive Alan Mulally, who has pushed the company toward a unified operating structure and rushed to roll out new fuel-efficient small cars.
"We remain confident in and focused on our plan to transform Ford into a lean global enterprise delivering profitable growth for all," Ford said in a statement.
Analysts noted that the market for auto sales in the United States and Europe had deteriorated sharply since April when Tracinda began to build a position in Ford.
Kerkorian's pullout from Ford would be a costly retreat for the activist investor, who has a mixed track record with his investments at all three Detroit-based automakers.
Kerkorian surprised analysts and investors earlier this year by spending more than $1 billion to take his stake in Ford for an average price per share near $7.10.
But Tracinda began selling Ford shares on Monday at $2.43, according to its statement. That represented a loss of almost 66 percent from what the fund paid on average.
"In light of current economic and market conditions, (Tracinda) sees unique value in the gaming and hospitality and oil and gas industries, and has, therefore, decided to reallocate its resources to focus on those industries," the investment firm said in a statement.
Ford shares have dropped 60 percent since June when Kerkorian raised his stake to 6.5 percent and said he was willing to support the automaker's turnaround with an injection of additional capital. Tracinda did not request a seat on Ford's board.
Kerkorian previously took a stake of nearly 10 percent in General Motors Corp and his adviser, Jerry York, held a position on GM's board for a short time, but resigned after GM rebuffed suggestions for changes and Kerkorian divested the stake.
Kerkorian also was a major shareholder in Chrysler before it was acquired by Daimler in the late 1990s and made an offer to buy the company in 2007 before it was sold to Cerberus.
Ford shares have lost about 85 percent since 2005 when the U.S. auto market began to weaken and all three U.S. automakers were forced to step up their restructurings.
U.S. auto sales have dropped to 15-year lows and are on track to weaken further in October. The slowdown has also spread to key markets in Europe and expectations for a recovery have been pushed back into 2010.
Ford posted an $8.7 billion loss for the second quarter and is expected to report a deep loss for the current quarter.
J.P. Morgan analyst Himanshu Patel said in a note on Tuesday he expected both Ford and larger rival GM to burn through more cash and post deeper losses in 2009 because of the slump in sales and tighter credit.
Patel nearly doubled his 2009 loss estimate for Ford, to $1.90 per share from 95 cents per share.
In a sign of the pressure on the industry, GM and Chrysler LLC are in merger talks an attempt to shore up cash and survive the industry slump, sources familiar with the plans have said.
GM also held earlier talks with Ford that broke off because Ford preferred to go it alone, sources have said.
The Ford family holds a stake of about 3 percent in the automaker, but controls about 40 percent of the voting power because of a separate class of shares established when it went public in 1956.
Ford's sales in the U.S. market have dropped by 17 percent through September. Over the same period, GM sales have dropped 18 percent. Chrysler is down 25 percent.
Pete Hastings, a fixed income analyst at Morgan Keegan, said it was not surprising Tracinda concluded it had better investment options.
"As the market has worsened in recent months, the prospects for a further capital injection would have diminished anyway," Hastings said. "It's not as big a blow as it would have been some months ago, but it's hardly a vote of confidence."
Ford's shares were down 7.7 percent at $2.15 on the New York Stock Exchange on Tuesday afternoon.