Kerkorian to Pay 4% of GM Profit to Consultant

Kirk Kerkorian, the billionaire investor who this year became General Motors Corp.’s third-biggest shareholder, agreed to hand over part of any profit on the investment to former Chrysler Corp. executive Jerome York.

York, who is consulting for Kerkorian’s Tracinda Corp., would be paid 4% of any profit in 2009, according to a copy of an agreement Tracinda filed with the Securities and Exchange Commission on Friday. Kerkorian, 88, holds a 7.2% stake in GM after buying 40.8 million shares since April.

Kerkorian’s investment comes as GM Chief Executive Rick Wagoner tries to return automotive operations to profit after the company’s $1.1-billion first-quarter loss, the Detroit-based automaker’s biggest in 13 years. Tracinda employed York as an advisor on its unsuccessful takeover attempt of Chrysler a decade ago.

“York is strictly part of Kerkorian’s demonstration,” said Burnham Securities analyst David Healy in Sierra Vista, Ariz. “He wants to convince other investors that GM is undervalued and he can bail out at high prices.”

The value of Beverly Hills-based Tracinda’s GM stake has risen $293 million. York, a former Chrysler finance chief, would be due $11.7 million at that level.

GM shares, which have risen 29% since the day before Kerkorian disclosed his stake May 4, rose 6 cents to $35.68 on Friday. Tracinda declined to comment beyond the filing.

Kerkorian originally intended to take a stake of 50 million shares in GM, falling short of his goal after shareholders failed to sell him enough stock at his $31-a-share offering price. Tracinda calls the stake in GM a “passive” investment. Wagoner said last week that Tracinda hadn’t asked for a seat on GM’s board.

York was a Tracinda vice chairman from 1995 to 1999. He was paid about $26 million to advise in the unsuccessful Chrysler takeover, according to testimony from a Tracinda employee in a 2003 court case. Chrysler was eventually bought by Daimler-Benz for $35 billion in 1998.