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Thursday, September 28, 2006

Kerkorian Wants More GM, A Return Before His 100th Birthday

Kirk Kerkorian want more GM shares. Buying them will put him over 10% as a shareholder, so he will have to get the customary waivers. He may get a return during his lifetime. Mr. Kerkorian was born in 1917, and its not getting any younger.

Kerkorian says that one of the reasons he wants the shares is that he believes that an alliance with Nissan and Renault, currently under discussion, will help the company.

But, he is making the deal harder to do. GM's shares will almost certainly hit their 52-week high of $33.50 on the news. And, GM's CEO has already asked Nissan and Renault for "tribute" to cover the disparity in value among the three companies. Carlos Ghosn, head of Nissan and Renault, has been taking his case to the press, often a sign of weakness. He says that the companies need the alliance to fend off Japanese car giant Toyota.

Kerkorian is clever. He is pressuring GM to make a deal with Ghosn or futher improve its operating margins. Kirk wins either way. Buying more GM shares ups the pressure on management, which has already taken $9 billion a year out of costs. Based on August sales figures, GM may also be stabilizing sales in the US.

With GM's stock up over 60% this year and still rising, Kerkorian may make a ton on his GM investment. He doesn't really need the money.

Douglas A. McIntyre can be reached at He does not own securities in companies he writes about.

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