GM in Talks Over Board Seat

General Motors Corp. said Wednesday that it was in talks with billionaire Kirk Kerkorian about giving his investment firm a seat on the automaker’s board of directors.

Kerkorian’s Beverly Hills-based Tracinda Corp. is GM’s third-largest shareholder, with a 9.9% stake.

Jerome York, 67, a longtime Kerkorian advisor and former Chrysler Corp. and IBM Corp. financial executive, was offered a seat on GM’s board, according to an Automotive News report.

Kerkorian, 88, has said in federal regulatory filings that his interest in financially ailing GM is a passive investment.

But GM’s stock has fallen about 30% since Kerkorian, who once tried to buy Chrysler Corp., announced his big stake in May. After spending nearly $1.7 billion, Kerkorian is about $400 million in the hole on his GM investment, based on Wednesday’s closing price.

Tracinda declined to comment Wednesday.

Analysts say Kerkorian isn’t one to stand idly by while his money swirls down a drain.

“It might be just what GM needs,” said Shelly Lombard, a GM analyst at GimmeCredit, a New York-based corporate bond research firm.

“York and Kerkorian are smart investors. Maybe they can be like a terrier nipping at GM’s heels, forcing them to move faster toward a restructuring,” she said. “So far, GM has been taking tiny baby steps in the right direction. They need to start running,” she said.

York has a big incentive to help GM recover: He will be paid 4% of any profit in Kerkorian’s GM investment, but not until 2009, according to a regulatory filing.

But York might not be able to add much to what GM already is attempting to do to reverse its fortunes, said David Healy, auto industry analyst at Burnham Securities.

“He’s an accomplished financial guy, but I’m not sure if he can bring all that much to the party” as just one of a dozen GM board members, Healy said.

GM has posted $3.8 billion in losses for the first three quarters this year and it continues to lose market share to Asian automakers. GM is expected to end the year with its biggest annual loss since its $23-billion deficit in 1992.

This year, GM’s bonds have been rated as junk by the major credit rating firms and late last month Chief Executive Rick Wagoner said the company would cut 30,000 hourly and salaried positions and close all or part of 12 facilities, including four vehicle assembly plants and four powertrain plants, by 2008.

Analysts said that Wagoner was under increased pressure to turn things around at GM and part of his strategy is to shrink its way back to profitability.

As part of its effort, Wagoner on Tuesday announced that Frederick Henderson, now chairman of GM of Europe, would become the company’s chief financial officer replacing John Devine, 61. Devine’s contract expires this year and he is expected to stay on as vice chairman to help advise the company.

Henderson built a reputation as a globe-trotting, cost-cutting executive and helped improve GM profit in Asia, Latin America and Africa. His promotion comes after Wagoner, 52, reached a deal in October to cut union healthcare costs by $1 billion a year and put a majority of GM’s profitable finance unit up for sale.

York worked with Kerkorian and former Chrysler Chief Executive Lee Iacocca when the two launched a hostile bid to take over Chrysler in 1995. That effort failed and Chrysler ultimately was acquired by Germany’s Daimler-Benz in 1999.

Kerkorian, a major Chrysler shareholder at the time, was instrumental in approving the sale, which resulted in the formation of today’s DaimlerChrysler Corp.

GM’s shares rose 65 cents Wednesday to $23.04. The stock has lost 42% of its value this year.

Times wire services were used in compiling this report.