Kirk Kerkorian is famous for his investment acumen. He's a man from humble origins who amassed a fortune in real estate and entertainment. And he's No. 27 on Forbes magazine's list of the wealthiest Americans.
So when Kerkorian's company, Tracinda Corporation, purchased a 6.4 percent stake in Ford earlier this year, it was seen as a vote of confidence in the battered automaker. It hasn't exactly been the smartest business move he ever made.
"The conditions have changed radically from the time Kerkorian first bought into Ford," says Pete De Lorenzo, publisher of the Web site autoextremist.com. He says since Kerkorian came on the scene, Detroit has been hit with a double whammy. Not only did gasoline prices rise, lessening demand for some of Ford's vehicles, but the credit crunch has made it a lot harder for consumers to get new loans.
After Ford's stock price plunged, Kerkorian's 6 percent stake in the company was worth about $311 million. It was valued at nearly a billion dollars last spring.
"I just think he grew impatient and sees a shakeout coming in the Detroit auto industry, and he really wasn't comfortable holding that much money in it," says De Lorenzo.
On Monday, Kerkorian said he wanted to unload his stake in Ford if he could get the right price. The news sent Ford's shares down another 8 percent. Forbes says Kerkorian is worth about $11 billion, so he's not exactly going to end up on the street. Still, for a man used to winning, the losses are sizable.
He takes his place alongside other billionaires who've lost big sums in the current downturn. Media titan Sumner Redstone, majority owner of Viacom, has been forced to sell hundreds of millions of dollars worth of stock to pay his company's debt. And there's speculation he may have to sell one of his prized assets, CBS.
And there are many others. Many of these were men far from young, says Jeffrey Sonnenfeld, associate dean of the Yale School of Management, adding that Kerkorian is 91.
"They're actually not a bunch of kids. They're very sophisticated investors, but it was very hard to read tomorrow's headlines," says Sonnenfeld. "It caught us continually by surprise. Some of the most sophisticated financiers, pundits, analysts have gotten it wrong."
Sonnenfeld says if past recessions are any indication, some of these men will climb back later. But not all.
"Some of the very wealthy, once quite savvy ones will not probably be impoverished. If you've fallen from $16 billion to a little less than a billion, they can still somehow make their ends meet, but [it will] surely be a humbling experience."
As for Ford, it already faces some especially tough business conditions, and Kerkorian's decision to bail on the company is just one more in a series of setbacks. Ford says regardless of what Kerkorian does, it will stay focused on its efforts to turn the company around.