KK Tells GM SOS

DETROIT, Jan 10, 2006; Tom Brown writing for Reuters reported that an adviser to Kirk Kerkorian, the billionaire Las Vegas casino mogul who is the biggest individual investor in General Motors Corp., on Tuesday told the automaker to step up efforts to stanch its mounting financial losses.

Saying it was time for GM "to go into crisis mode," Jerome York, a former Chrysler Corp. chief financial officer, urged the ailing automaker to sell off or close noncore businesses and assets and halve its $2 annual dividend, which costs the company about $1.1 billion per year.

He also said GM should slash compensation for its directors and senior managers and cut wages across the company, which is reeling from U.S. market share losses and mountainous costs for labor, health-care and pensions.

Seeking to drive home a sense of urgency, York also said GM needed to offer fewer and better products and consider getting rid of brands such as Saab, which he called a "pretty consistent money loser."

"When a company is in deep trouble -- and make no mistake, GM is at the present time -- there are only so many hours in the day for management to effectively focus on and fix things," York said."

"That focus needs to be on the important levers that can really move the needle," he added.

York's comments, to a gathering of automotive analysts on the sidelines of the North American International Auto Show, came against the backdrop of persistent speculation about a possible filing for bankruptcy at the world's largest automaker, which lost more than $4 billion in North America in the first nine months of 2005.

Hurt by cut-throat competition from more nimble car makers like Toyota Motor Corp., and by many cars and trucks that can only be sold by offering deep discounts, financial analysts say GM is poised to announce its fifth consecutive quarterly loss when it posts results later this month.

Calling for "equality of sacrifice" between labor and management at GM, York cited recent analyst reports about what could happen with wages, health care and pensions at the company if it actually went bankrupt.

"It's pretty ugly," said York, who was instrumental in previous turnarounds at Chrysler and IBM Corp. (IBM.N: Quote, Profile, Research) .

Kerkorian, who rocked Detroit with a failed takeover bid for Chrysler a decade ago, has kept a relatively low profile since his Los Angeles-based Tracinda Corp. bought nearly 10 percent of GM's shares last year.

He sold off 12 million shares, cutting his stake to 7.8 percent in a tax-motivated sale last month. But York said he was interested in reacquiring the 12 million shares, and possibly boosting his stake by 24 million shares, if GM takes "aggressive and effective actions to improve the performance of the company."

Tuesday's public comments by York, who Kerkorian has unsuccessfully tried to get appointed to GM's board, were received warmly by GM's newly appointed Chief Financial Officer Fritz Henderson, who was on hand to listen to York's speech at the Detroit hotel and office complex that happens to house GM's global headquarters.

"This is one of our largest shareholders who is articulating his vision for what we need to do, and frankly there is a lot that he had to say that I agree with," Henderson told reporters after the speech.

Henderson said GM's board would review the company's dividend, but declined to say whether he would recommend cutting the quarterly payout as York had urged.

"It's something that the board of directors seriously considers on a regular basis," he said.

Henderson also said it was "too soon" to discuss what other cost-cutting measures GM might take.

GM's stock fell more than 50 percent on the New York Stock Exchange last year, dealing major losses to Kerkorian and other shareholders who bet on the one-time industrial icon.

York said there was still time to return GM to prosperity, but he also cautioned that GM was burning through $24 million in cash per day and faced "brutal realities" across the hyper-competitive U.S. market.

York, however, praised plans announced by GM in December to close all or part of 12 North American plants and cut 30,000 blue-collar jobs through 2008.

"GM has a mountain of liquidity on hand -- both cash and noncore assets -- that can be sold. So it has the wherewithal to fix itself," York said.

Additional reporting for Reuters by Kevin Krolicki and Nick Zieminski