As Kerkorian Leaves, GM Cuts Some More

Kirk Kerkorian is gone. He sold that last of his GM shares yesterday. It does not make him a bad person. He had just lost faith in the company’s management,so he left with only a $100 million profit on his $1.6 billion investment. He should have put the money in T-Bills.

The press is pressing the view that Kerkorian’s exit is bad for GM. The Wall Street Journal writes that the "move clouds the outlook for a restructuring program." Why? Kerkorian is an 89-year old man who had become impatient. The market has given GM higher marks, taking its stock from $18.33 to $29.23 over the last twelve months.

And, the GM restucturing may just be gaining speed. The company’s CEO, Rick Wagoner, told BusinessWeek that he intends to make cuts beyond the annual $9 billion in savings that are already in place for the company’s North American operations. This will involve more employee buy-outs and plant closings. The UAW may stand in the way of some of these programs, but, with the future of the car company hanging in the balance, the upper hand in negotiations may have shifted to GM.

Kerkorian may be bitter about his investment, but that is not necessarily a sign that things are bad at GM.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.