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GM taps Kerkorian aide; No move on dividend yet

Election of Kerkorian aide to board likely to lead to more restructuring at the world's biggest automaker.
February 6, 2006: 5:49 PM EST


NEW YORK (CNNMoney.com) - General Motors Corp. said Monday it named a top aide to billionaire investor Kirk Kerkorian to its board of directors, the latest push by the world's largest automaker to reverse last year's huge losses.

But as of late afternoon, GM (Research) had said nothing about its dividend, despite calls by Kerkorian and some industry experts and investors for the automaker to slash the payout, which cost GM $1.1 billion last year.

The troubled automaker announced that Jerome York, a consultant to Kerkorian's Tracinda Corp., was elected to GM's board at meeting of the board Monday. The appointment is effective Tuesday.

"Jerry brings years of business experience and knowledge of the automotive industry to the GM Board," GM CEO Rick Wagoner said in a statement.

Through Tracinda, Kerkorian owns about 9.9 percent of GM stock, making the Las Vegas investor the company's biggest individual shareholder.

York is a veteran of the auto industry, where he helped lead a turnaround of Chrysler, and has also served in senior posts at IBM and at Tracinda.

York is also a director of Tyco, Apple and Exide Technologies.

In its brief announcement, GM said nothing about its dividend, which GM last cut in 1992, slashing the payout in August of that year to 20 cents a quarter from 40 cents.

GM subsequently boosted the payout three times and had been paying 50 cents a quarter, or $2 a year, for the past nine years.

But last year GM posted huge losses and saw its bonds cut to junk status as it lost more market share to competitors like Toyota and Nissan and saw sales fall in its core North American auto market.

Last month GM reported a 2005 net loss of $8.6 billion, or $15.13 a share, and officials have declined to say when they expect the company's auto operations to turn a profit.

In a speech in Detroit in January, York advocated that GM slash the dividend in half, even though such a cut would cost Kerkorian $56 million a year.

York argued that in addition to a steep dividend cut, GM also needed to negotiate or impose pay cuts for directors and officers, as well as salaried and hourly staff at GM, in order to stem losses and turn around the troubled company.

Last November GM said it would cut about 30,000 jobs and close or scale back at a dozen North American plants in a bid to save $7 billion a year. (Full story).

GM (Research) stock, which has tumbled over the last year, is yielding about 8.6 percent, by far the highest of any company in the Dow Jones industrial average.

The stock rose about 0.8 percent in regular trading on the New York Stock Exchange.

GM also said that Stanley O'Neal, CEO of Merrill Lynch & Co., had resigned from its board due to scheduling conflicts and limits on his ability to act as a GM director from potential conflicts of interest regarding Merrill.