CIT Group Inc. (NYSE: CIT) shares plummeted Wednesday after the firm revealed that it had borrowed $7.3 billion to repay debt, making it a potential acquisition target at these cheap levels. The firm is seen by many to have manageable liquidity in the near-term and a stable credit outlook going forward, but shares are becoming so cheap that financial institutions that want to expand their middle market presence may be interested.

The problems at CIT stem from its dangerous portfolio of securities. The firm's latest 10-Q shows holdings in student loans and other securities that are facing substantial liquidity concerns. In fact, many believe that its portfolio is far worse than that of Bear Stearns, Merrill Lynch, or other large players.

Any potential acquisition would likely not occur at a premium, but rather simply offer shareholders an emergency exit. Meanwhile, the company itself said that it would continue to actively seek additional funding sources, as well as explore and execute on the sale of non-strategic assets and/or business lines. This suggests that the company would be open to any potential acquisition offer.

In the end, there are several courses of action that CIT could end up taking. If the firm decides to stand alone, it could either raise money through bank financing or issuing equity. Obviously, both of these are bad for shareholders unless they truly help the firm turn around. However, an acquisition could offer a great way for shareholders to exit their investment in the near term and cut losses.

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Automakers have it tough these days as consumers are not only spending less money but also dealing with record oil prices. The unfortunate side effect has been slower-than-expected auto sales and a move by consumers to the less profitable fuel-efficient vehicles. The big three U.S. automakers are now preparing to confront these problems by cutting costs and taking other measures to protect themselves. The question is: Will it be enough?

General Motors Corporation (NYSE: GM) announced that it has pushed some planned capital expenses from the first quarter to later in the year in order to make sure it has enough cash in the event of a worsened downturn in the U.S. Meanwhile, Ford Motor Company (NYSE: F) executives said they were also considering further cost cutting measures to reach profitability in 2009. And finally, Chrysler said it would lower production at several plants in anticipation of weaker sales this year.

Despite the similar actions to cut costs, the automakers seem to disagree on the industry's direction. Chrysler noted that it believes the market will continue to weaken for the rest of the year while General Motors has indicated that it expects sales to rebound during the second half of the year. Howver, all of the automakers have agreed that the selling pace in the first two months of the year came in below projections.

There has also been some concern surrounding the financing subsidiaries that provide auto loans to consumers. In particular, analysts were concerned that GM's 49% ownership in GMAC require it to make further cash infusions in order to ensure liquidity. However, GM has denied that such injections are needed and that its financing wing remains in good shape.

In the end, automakers will likely face a tough rest of the year as they gear up for further cost cutting to meet their internal earnings goals. Investors may want to watch for a turnaround as a combination of that and cost cutting could result in higher-than-expected earnings and a boost in the share price. Combined, these factors make GM and F two companies worth watching!

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Micrel, Inc. (NDAQ: MCRL) may be providing power for its customers, but its shareholders have been feeling rather powerless. All that's about to change after a large activist hedge fund expressed its disappointment in the company and demanded that it immediately explore strategic alternatives in a Schedule 13D/A filing with the SEC. The news comes after shares have rallied off of their lows but continue to underperform the market.

Obrem Capital Management, which owns 9.6% of the company, believes that the shares are substantially undervalued and demanded the board take action to proactively enhance shareholder value. The hedge fund blasted management for failing to create shareholder value over the past decade despite the company's multiple competitive strengths. Obrem attributes these failures to a number of reasons that can be easily remedied via an acquisition.

Micrel operates from a strong technology platform with an attractive customer base and a solid reputation within the semiconductor industry. Unfortunately, the company's insufficient scale, poor outsourcing strategy, and bloated cost structure have caused problems. Micrel lags its peers in revenue growth, earnings growth, operating margin, and share price performance despite its multiple competitive advantages.

Obrem recommended that the board seek to unlock value by selling Micrel to a strategic buyer. The problems could be easily resolved in an acquisition through an increase in manufacturing scale and lower costs realized thanks to economies of scale. Additionally, the valuable customer base, top-notch technology, and strong balance sheet would ensure a healthy premium.

In the end, Micrel is a company that is trading below value thanks to problems that could be easily solved through an acquisition. Obrem is hoping that the board will at least setup an independent special committee to examine strategic alternatives, but it will be interesting to see whether or not the company sees eye-to-eye. This makes MCRL a stock worth watching!

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