Tracinda Hits the GM Brakes

Updated from 1:21 p.m. EST

Look out General Motors (GM Quote), Kirk Kerkorian is juggling his portfolio.

Shares of the world's largest automaker recently were down $1.73, or 5.3%, to $30.88 after its largest individual shareholder, Kerkorian's Tracinda Corp., revealed that it cut its stake in the company.

Kerkorian recently lowered his stake in GM to 7.4% from 9.9%, according to a Securities and Exchange Commission filing. The move follows disagreements with GM's management over the direction of the company. It also confirmed rampant speculation on Wall Street that Kerkorian is backing off his bet on the U.S.-based auto industry, which has pushed shares of GM down about 13% this week.

After a disastrous 2005, GM shares are up 67% for the year, leading the Dow Jones Industrial Average. The rally picked up steam in February when Tracinda installed its representative, Jerry York, on GM's board of directors after launching a flurry of public criticism against the company's management.

York, however, stepped down from the board last month. With his resignation and Kerkorian is backing off his stake, investors are worried that a momentum shift back to the downside could be at hand.

"It may be that the short-term move up in the stock is over for now," says Robert Toomey, analyst with E.K. Riley Advisors. "I'd rather see Kerkorian with more of a stake in there. That's been part of the reason why I've been recommending the stock, but my impression is that GM's management is still very motivated to execute this turnaround that they've started."