Kerkorian girding for battle with GM board

DETROIT - General Motors could face a protracted fight for control after an advisor to billionaire investor Kirk Kerkorian quit the automaker's board last week in a bitter split, analysts said today.

Former IBM and Chrysler executive Jerry York, who last week resigned from GM's board, on Monday scheduled a month-end presentation for investors, his first such appearance since laying out Kerkorian's reform agenda for GM nine months ago.

The move came as analysts cautioned that Kerkorian appeared to be setting the stage for a possible proxy fight aimed at electing dissident GM directors and forcing out Chief Executive Rick Wagoner.

"Based on the language of Mr York's resignation letter, we would not be surprised to see an eventual proxy fight and/or increased scrutiny of GM's future board decisions," Joseph Amaturo, analyst with Calyon Securities said in a note for clients.

York scheduled an Oct. 30 speech in Las Vegas before a group of auto industry analysts and investors a meeting sponsored by Gabelli & Co., the brokerage firm said on Monday.

A spokeswoman for Kerkorian's Los Angeles-based investment firm Tracinda Corp., which owns 9.9 per cent of GM and has retained York, said she had no further information on the topic or content.

Just before he joined the GM board, York used a similar appearance before industry analysts in Detroit to pressure the automaker to take a number of steps later adopted by management, including cutting executive pay and the dividend payout.

York stepped down from GM's board on Friday after voting with other directors to nix a three-way alliance with Renault-Nissan first proposed by Kerkorian.

Criticizing an "environment" he said made it hard for directors to challenge management, York said in his resignation letter that GM had erred by not bringing in advisors to evaluate the merits of the proposed alliance directly for the board.

GM has countered that investment banks Morgan Stanley and Goldman Sachs advised the company on the proposed Renault-Nissan deal, and a company spokesman last week dismissed York's charge of insufficient board oversight as "absurd."

But GM executives are bracing now for a possible proxy fight with Kerkorian, a person familiar with the situation said.

A proxy fight can be a "pretty costly, long and arduous process," said Gerald Meyers, a University of Michigan business school professor and former chairman of American Motors Corp. "But Kerkorian is capable of it and has done it before."

Meyers also said Kerkorian could sue GM for not appointing independent financial advisors to look into an alliance with Nissan-Renault and report directly to the board.

But by bringing in Morgan Stanley and Goldman Sachs to study the deal GM has a "bullet proof" defence, he said.

Kerkorian, 89, said last week he no longer plans to buy 12 million more shares in GM as he had said he might do when the Renault-Nissan deal was still on the table.

But analysts do not expect the activist investor, who rocked Detroit a decade ago with a failed takeover bid for Chrysler, to sell his 56 million shares in GM.

"While we would not completely rule out Tracinda selling its stake, we believe such a course of action would be out of character for Kerkorian whose gains so far (in GM shares) have been marginal," JP Morgan analyst Himanshu Patel wrote in a note for clients on Monday.

GM shares rose almost 1.5 per cent to US$31.51 on Monday, but remained down from a recent high of US$34 hit last week before Kerkorian's announcements.

The recent drop in GM shares, which have gained about 60 per cent since the start of the year, has taken Kerkorian's US$1.7 billion ($2.62 billion) investment in the automaker to about break even.

- REUTERS