October 7, 2006 in Business

Kerkorian backs off GM plans

Associated Press The Spokesman-Review
Associated Press photo

Kirk Kerkorian is holding off on plans to increase his stake in General Motors.
(Full-size photo)

WASHINGTON — When Jerome York joined the board of General Motors Corp. earlier this year, the veteran auto industry executive hoped to shake up GM and restore it to profitability in the ultra-competitive global auto industry.

But only months into his tenure, York has “concluded there is little point in my remaining on the board.”

York, a key adviser to billionaire investor Kirk Kerkorian, resigned from the GM board Friday, citing a board room environment unreceptive to extensive probing and “grave reservations” about GM’s abilities against Asian competitors.

Kerkorian, meanwhile, signaled he would not acquire more stock in the world’s biggest automaker after GM decided against pursuing an alliance with Renault and Nissan. He already controls 9.9 percent of GM shares and had recently indicated he was considering raising that stake to 12 percent.

The twin developments, disclosed in a filing with the Securities and Exchange Commission, sent GM shares tumbling on the news, shaving $1.2 billion off the company’s value and about $116 million off Kerkorian’s stake. General Motors Corp. shares dropped $2.08, or 6.3 percent, to close at $31.05 Friday on the New York Stock Exchange. The announcements also raised speculation about whether Kerkorian could start a proxy fight for control of the board.

York said in his resignation letter obtained by The Associated Press that he had not “found an environment in the board room that is very receptive to probing much beyond the materials provided by management.”

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