Now at 64, Icahn, the whip-smart kid from Queens, N.Y., who grew up to be one of the most feared predators of the go-go ’80s, is shooting for his biggest score yet: General Motors. The company that Alfred Sloan built into the 20th-century model of American industrial power has become just another Old Economy laggard in the 21st century. Its stock price has sunk so low that the world’s No. 1 automaker could be bought for around $37 billion, or about one fifth of what AOL paid for Time-Warner. So Icahn, who always had an eye for a bargain, fired off a terse letter to GM on Aug. 16 revealing his intention to buy up to 15 percent of the company.
As if in a flashback to the greed-is-good decade, GM’s board convened a special meeting to deal with Icahn. But they needn’t panic. Icahn is no longer a barbarian at the gate. These days he’s more a contrarian inside the gate, rabble-rousing to push management to share the wealth with all stockholders. (In fact, Icahn’s offices are in the GM building in New York.) In the old days, Icahn would sack executives and take over management of his target company, while selling assets and firing workers to pay for his investment. But now Icahn is most likely interested in seeing GM sell off its Hughes Electronics subsidiary, which includes the fast-growing DirecTV satellite-television franchise. Media mogul Rupert Murdoch is rumored to be keenly interested in DirecTV and such a deal would mean a windfall for a big shareholder. A source who spoke to Icahn about his GM investment said he was attracted by the cheap stock price and, with a valuable asset like Hughes, he sees a big opportunity to boost it.
But no one can be sure of Icahn’s true intentions because he’s not saying. When GM vice chairman Harry Pearce called Icahn on Aug. 17 to let him know GM planned to make his investment plans public, the old raider was taciturn. “We don’t really know what he’s going to do,” says one GM insider. “He’s choosing not to tell us.”
Typical Icahn. But one thing seems clear: He’s in it for the money, not to take the keys and drive General Motors. He learned a painful lesson from running TWA in the 1980s and going bankrupt. He’s even reformed his greenmailing ways. Back in the ’80s companies like Viacom and BFGoodrich paid Icahn tens of millions in greenmail just to make him go away. But greenmail became a dead letter with the poison-pill defense, which stops raiders from accumulating more stock than management wants them to.
So to stay in the game, old raiders like Icahn are changing their tactics. The new MO is to force management to spin off valuable assets like Hughes to enrich all shareholders. Call it greenmail for the masses. As an investor at RJR Nabisco since 1995, Icahn harangued management to divorce the wholesome Oreo cookie business from its RJ Reynolds tobacco. That’s just what happened when Nabisco sold out to Philip Morris for $15 billion in June, and Icahn pocketed a cool $600 million.
Now Icahn feels like he’s in the zone again and he’s ready to take on the world’s largest corporation. In a letter to Fortune magazine last month, Icahn compared himself to Paul Newman in “The Hustler.” “I understand again what Newman meant,” wrote Icahn. “Playing the game ’like nobody ever played it before’ is its own reward.” Another part of his letter should seem ominous to GM, which has gone from controlling half the American car market in Sloan’s day to just 28.5 percent today. “Today, many companies excuse their poor performance by labeling themselves part of the old economy–whatever that means,” Icahn wrote. “But the real reason for underperformance is often the underutilization of assets by inept, entrenched management.”
In the end, though, Icahn is really just interested in turning a profit, not fixing GM’s problems. Many things have changed since Icahn’s 1980s heyday. But making money is still the best way to keep score.
