Maybe Carl Icahn Should Look in the Mirror: His Federal Mogul Under-Performing

Activist investor Carl Icahn makes headlines – and money – using unabashed criticism of companies when he initially invests. We’re starting to wonder when he’ll look in the mirror.

In a failed attempt to rally fellow shareholders around his tender offer this fall for truck maker Oshkosh (OSK), Ichan told Bloomberg TV, “You have what I consider to be poor management. The board has been there a long, long time…It’s time for [Oshkosh CEO] Charlie Szews to say adios.”

Icahn first disclosed his 9.5% Oshkosh stake last summer but recent scaled back, after Oshkosh investors snubbed his tender offer to acquire the company at $32.50 a share and carry out his management shake-up. Maybe that’s because they’ve been watching a stock Icahn has controlled does control, auto industry supplier Federal-Mogul (FDML). The raider holds nearly 80% of the company. He acquired a controlling stake in 2008, after the company emerged from bankruptcy protection.

Federal-Mogul shares have lagged U.S. auto industry stocks for more than a year, as seen in a stock chart.

FDML Chart

FDML data by YCharts

Analysts identify cash from operations as an important performance metric for Icahn (See “Carl Icahn is Famous for Raising Hell, But Which Balance Sheet Item obsesses the Investor?” yCharts, July 12, 2012). But Federal-Mogul’s track record in generating cash has been erratic, especially when compared to Tenneco (TEN), a Federal-Mogul peer in the auto industry supply business.

FDML Cash from Operations TTM Chart

FDML Cash from Operations TTM data by YCharts

Federal-Mogul also loses to Tenneco in asset utilization, defined as revenue per dollar of assets, another measure of results for long-term investors and an indicator of how well auto suppliers are faring in the recent resurgence of the industry.

FDML Asset Utilization Chart

FDML Asset Utilization data by YCharts

Icahn named a new CEO last March and in September split the company into two operating units – powertrain products for original equipment manufacturers and an aftermarket products division, each with its own CEO (new CEO Rainer Jueckstock wears an additional hat as power train CEO).

It’s early, but Icahn’s effort to practice what he preaches regarding management reorganization is not yet paying off at Federal-Mogul.

Bill Barnhart, a contributing editor at YCharts, is a 36-year veteran of business reporting. Most recently he was the financial columnist for the Chicago Tribune, where he offered daily commentary on financial markets. He is a past president of the Society of American Business Editors and Writers. He can be reached at editor@ycharts.com.

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