Report Says General Motors Board Votes to Cut Dividend

FRANKFURT February 7, 2006; Reuters reported that General Motors' board of directors has voted to halve the struggling U.S. automaker's $2 per share annual dividend, industry paper Automotive News reported on Tuesday, citing sources close to the board.

A spokesman for General Motors Europe called the report speculative, noting that Monday's board meeting was to decide on the group's dividend but that the company had not yet made any announcement on the decision.

"This is Automotive News speculation at this point," he said.

GM later said it would issue a statement at 1330 GMT and hold a news conference at 1400 GMT. It gave no other details.

GM shares traded in Frankfurt slipped 1.4 percent to 19.50 euros by 1105 GMT.

Bids on General Motors' 8.375 percent euro bond due in July 2033 rose 0.4 point to 72.46 percent of face value.

The newspaper report followed news that the world's largest automaker had elected to its board an aide to Kirk Kerkorian, GM's largest individual shareholder and an outspoken proponent of more aggressive turnaround efforts at the automaker.

Jerome York, a consultant to Tracinda Corp -- billionaire investor Kerkorian's investment arm -- joins the board effective February 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.

Cutting the dividend could help management show labor that shareholders are being asked to make sacrifices at a time when GM is cutting thousands of manufacturing jobs and closing plants.

GM, the world's largest carmaker by volume, 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.

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.