By Soyoung Kim and David Bailey
DETROIT (Reuters) - Billionaire Kirk Kerkorian sold shares worth about $18 million in Ford Motor Co
Tracinda Corp, his investment company, said on Tuesday it had sold the shares was working with an investment bank on the potential sale of all 133.5 million shares it still holds.
Tracinda's investment in Ford had been seen as a vote of confidence in the No. 2 U.S. automaker and its turnaround strategy, and Ford shares tumbled 7 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 vehicles in the United States and Europe had deteriorated sharply since April when Tracinda began to build a position in Ford.
"Who needs the aggravation of trying to turn around a distressed company in a troubled industry in the middle of an economic downturn?", Shelly Lombard, a bond analyst at Gimme Credit, said in a research note.
"Ford has lost a potential source of liquidity, someone who could write a check for a few billion if it needed the capital," Lombard said.
MONEY LOSING
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.
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
His adviser, Jerry York, held a seat on GM's board for a short time but resigned after GM rebuffed suggestions for changes and Kerkorian sold 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 private equity group Cerberus.
ROUGH CLIMATE
Ford shares have lost about 85 percent of their value 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 a loss of $8.7 billion 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.
In a sign of the pressure on the industry, GM and Chrysler LLC
The Ford family holds about 3 percent of the automaker but controls about 40 percent of the voting power because of a special 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 that 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 7.3 percent at $2.16 on the New York Stock Exchange on Tuesday afternoon.
(Additional reporting by Nick Carey; Editing by Matthew Lewis and Ted Kerr)
