Kerkorian Ally Resigns From GM Board

Billionaire investor Kirk Kerkorian smiles during his appearance before the Mississippi Gaming Commission May 18, 2000, in a Jackson, Miss. file photo. Kerkorian has a decision to make now that General Motors Corp. has decided against pursuing a three-continent alliance that he had sought. (AP Photo/Rogelio Solis, File) (Rogelio Solis - AP)

WASHINGTON -- A key adviser to billionaire investor Kirk Kerkorian resigned from the General Motors board on 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.

Jerome York, a respected auto industry veteran, said in his resignation letter obtained by The Associated Press that he had "concluded there is little point in my remaining on the board." He said he had not "found an environment in the board room that is very receptive to probing much beyond the materials provided by management."

Citing a complaint raised by Kerkorian's private equity firm Tracinda Corp., York said the board should have hired its own independent advisers to evaluate the potential alliance. He did not appear optimistic about GM's future.

"I have grave reservations concerning the ability of the company's current business model to successfully compete in the marketplace with those of the Asian producers," wrote York, a consultant to Tracinda.

GM said in a statement that "under the direction of the GM board, we remain focused on our North America turnaround, where we are making real progress, progress that is well ahead of what some skeptics thought possible."

GM spokesman Brian Akre said 11 of the 12 board members are independent of management.

"They all have very impressive backgrounds in business. To suggest that they have not challenged and questioned our management is absolutely absurd," he said.

Some analysts said York's departure from the board gives Kerkorian more flexibility to pursue a number of options, which could include additional investments in the company or a proxy fight to wrestle control of the GM board.

"I suspect Mr. York is resigning at his instruction and it frees him from any charge that he has material nonpublic information," said John Coffee, a securities law expert at Columbia University.