General Motors Corp. said yesterday it is negotiating with billionaire investor Kirk Kerkorian about a possible board seat, adding new pressure on GM management to accelerate a turnaround of the automaker's U.S. operations.
Kerkorian's investment company, Tracinda Corp. has acquired 56 million GM shares since the spring, representing 9.9 percent of the company. He is GM's largest shareholder and has a history of assembling large stakes in companies and pressing management to make changes, most notably at Chrysler Corp. in the 1990s.
GM spokeswoman Toni Simonetti did not give other details about the talks, and a Tracinda spokeswoman declined to comment. In earlier regulatory filings, Nevada-based Tracinda indicated it would consider pursuing a board seat.
The confirmation of GM's negotiations with Kerkorian comes as the nation's largest automaker confronts a set of challenges that some analysts see as the biggest threat yet to its survival. The company has lost more than $4 billion in its North American operations during the past year, and its market share has plummeted in the face of foreign competition and rising fuel prices that have softened demand for sport-utility vehicles, a major source of company profits.
Last month, G. Richard Wagoner Jr., GM's chairman and chief executive, announced a plan to cut 30,000 jobs, close several plants and enact other cost-cutting moves. Analysts and industry observers have not been impressed and some have said that odds are growing stronger that GM will eventually end up in bankruptcy court.
"Wagoner has shown no evidence that he has taken steps to resolve GM's systematic problems -- bureaucratic management, inefficient product design and excessively paid blue-collar workers and senior executives," said Peter Morici, economist and professor at the University of Maryland School of Business. "Its automotive segment is broken and merely closing plans does not repair it."
On Tuesday, GM shook up its top management, naming Frederick A. Henderson as chief financial officer and vice chairman. Henderson has served as the chairman of GM Europe, where he slashed jobs as part of a restructuring effort there.
The management change was the second major leadership shift at the company this year. Wagoner sidelined top managers of the North American division this spring and effectively took over those operations.
Wagoner and other executives have blamed GM's financial shortfalls on the generous pay and benefits it traditionally offered to its union workforce. In October, Wagoner reached a deal with the United Auto Workers to cut health care costs by reducing benefits for UAW current workers and retirees.
Kerkorian, 88, has a long track record of investing in companies and aggressively pushing for changes that improve returns for shareholders. In the 1990s, he bought a large stake in Chrysler, eventually becoming its largest shareholder. In a power struggle, Jerome York, Kerkorian's key financial lieutenant, won a seat on Chrysler's board from which he pressed managers to improve the company's profitability. Kerkorian ultimately launched a takeover bid for Chrysler that failed. In 1998, Chrysler executives agreed to merge with Germany's Daimler-Benz.
When his investment in Chrysler soured following the merger, Kerkorian sued the combined company, DaimlerChrysler, leading to a messy courtroom battle. Kerkorian lost the case earlier this year, but vowed to appeal. York is again working with Tracinda in dealings related to the Kerkorian's GM investment, based on government financial filings.
GM's shares have tumbled since January, knocking hundreds of millions off the value of Kerkorian's investment, which stands at about $1.29 billion. Tracinda bought its last block of GM shares in October at $27 apiece. The value of Kerkorian's Tracinda investment has declined by about $190 million since his last purchase.
"Kerkorian is going to force GM to think more seriously about its use of capital," said Morici.