General Motors Corp. said on Monday it elected an aide to Kirk Kerkorian, GM’s largest individual shareholder and an outspoken proponent of more aggressive turnaround efforts at the struggling automaker, to its board.
Jerome York — a consultant to Tracinda Corp., billionaire investor Kerkorian’s investment arm — will join the board effective Feb. 7.
York last month called on GM to halve its annual dividend, reduce compensation for executives and board members, and shed ”non-core” brands including Saab and Hummer.
As of Jan. 25, Kerkorian had increased his stake in GM to 9.9 percent, according to a regulatory filing, and said he might buy 12 million additional shares if GM met his demands for turning the company around.
The world’s largest automaker lost $8.6 billion in 2005, as it struggled with high labor and raw-material costs, loss of U.S. market share to foreign rivals and sluggish sales of sport utility vehicles — its biggest generator of profits.
“I think what you’ll see with York on board is a greater sense of urgency to drive changes and accelerate restructuring actions,” Morningstar Inc. analyst John Novak said.
The automaker plans to slash 30,000 jobs and close 12 facilities through 2008.
“There will probably be more changes, and they will be quicker. You’ll probably see a more aggressive restructuring plan,” Novak said.
York will serve on the Board’s public policy and investment funds committees.
Several analysts had expected GM to announce a dividend cut after its board meeting on Monday, and some continue to expect an announcement.
“I think they will cut the dividend today,” Burnham Securities analyst David Healy said. “They should say something about the dividend one way or the other. Financially, GM shouldn’t be paying any dividends at all,” he added.
GM’s 2005 annual loss was its largest since 1992, when it last cut the dividend. The board cut the payout by 50 percent in November 1992.
At 8.3 percent, GM shares carry the highest dividend yield on the Dow.
Some analysts have said that cutting the dividend would also give Chief Executive Rick Wagoner leverage in future negotiations with its union, which has already ratified a deal that would save GM $1 billion in annual health-care expenses.
Merrill Lynch analyst John Murphy said he expects GM’s dividend will be cut in half. “It may be announced today, it may be announced tomorrow, it’s tough to call, but we think it will almost definitely happen before September 2007,” he wrote in a research note late Monday.
GM’s contract with its union expires in 2007.
GM also said its board accepted the resignation of E. Stanley O’Neal, chairman and chief executive officer of Merrill Lynch Co., Inc.
O’Neal cited increased time demands due to the expanded schedule of GM board meetings, and limits on his ability to act as a GM director because of potential conflicts with matters in which Merrill Lynch is involved.
