Either Las Vegas mogul Kirk Kerkorian is giving up on his vision for

General Motors

(GM) - Get Report

or he is taking the gloves off and getting ready to go after CEO Rick Wagoner's throat as an outsider.

Kerkorian's associate, Jerome York, resigned from GM's board Friday after the company broke off talks with

Renault-Nissan

about a global alliance between the automakers.

Moreover, Kerkorian's firm, Tracinda Corp., reversed course and said it doesn't plan to add to its 9.9% stake in the company.

In a letter to GM's board, York said he has not "found an environment in the board room that is very receptive to probing much beyond the materials provided by management," and he said management's materials were not sent to the board ahead of time to allow study prior to board meetings.

"For obvious reasons, I can understand why that environment exists, but in the sense that all parties' interests are fully aligned around long-term shareholder value creation, that environment has been a puzzle to me," York wrote in the letter.

George Magliano, director of automotive industry research with Global Insight, says York's resignation could widen Tracinda's range of options in seeking to influence change at the ailing automaker.

"Being inside the board limits

Tracinda's ability to move GM and its board in different directions," says George Magliano. "This is a maneuver to give them more free rein to come back with something different."

Magliano declined to speculate on what that "something different" may be, but he says it's unlikely that Kerkorian will go away quietly.

"Kerkorian wouldn't want to dump the stock, because that would kill the price," he says. "The object is to rethink the strategy and come back with another game plan to put more pressure on Wagoner and get the stock moving."

Shares of GM tumbled $2.08, or 6.3%, to $31.05 on the news of York's exit, and speculation was swirling through the markets that Kerkorian may come back at the company with a proxy fight or some sort of hostile takeover attempt to undermine GM's leadership.

In response to York's resignation, GM defended its decision to end talks with Renault-Nissan about a partnership prior to its previously announced deadline set for later this month. The company said "the alliance framework required by Renault-Nissan would substantially disadvantage GM shareholders," and the synergies and cost savings that would be achieved by the deal were "highly skewed" to Renault-Nissan's advantage.

"The structure also included the requirement to sell a substantial equity stake in GM at no premium, along with preferential rights, which could have had the practical effect of foreclosing GM from entering equity alliances with other

manufacturers," said GM in a press release. "Renault-Nissan made it clear they were unwilling to pay any premium in any of these areas."

In his letter to the board, York said that while GM may have properly conducted its assessment of the alliance "from a narrow legal perspective," he said the board should have hired independent advisers to assess the deal.

York also said that GM has made progress on its restructuring, but the overriding issue of the company's market share declines have yet to be addressed properly. He said he has "grave reservations about the ability of the company's current business model to successfully compete in the marketplace with those of the Asian producers."

GM defended the scope of its restructuring efforts.

"Over the past 12 months, we have implemented several fundamental moves -- in health care, manufacturing capacity, hourly attrition, salaried and executive headcount and benefits, asset sales and liquidity enhancements, acceleration of key product launches, introduction of the industry's best warranty, and completely revamping our marketing strategy," the company said.

"These actions are already yielding very significant and needed improvement in our results -- more than $9 billion in yearly cost savings on a running rate basis by the end of 2006, and record revenues in the first two quarters of this year, to name but two significant ones."

Rocky Relationship

Tracinda originally disclosed its stake in GM at a time when Wagoner was facing blistering public criticism that he had yet to fully come to terms with the extent of the automaker's problems.

The company posted a loss of $10.6 billion in 2005, a year when its stock plunged by more than 30%, after Wagoner had originally predicted it would earn $4 to $5 a share. All three major agencies lowered the GM's credit rating deep into junk territory, and the company was under scrutiny from regulators for its accounting practices.

The relationship between Tracinda and GM got off to a rocky start when York went public with a list of steps it said the company needed to take to address its predicament. Ultimately, he was brought on to the company's board of directors in February.

Subsequently, the company's fortunes began to rebound. It slashed its dividend payment in half. It agreed to sell off majority stakes in its residential mortgage business and its financing arm to private equity firms to raise cash. It executed its massive employee-buyout plan, and it posted better-than-expected earnings on an operating basis in its second quarter. In response, the stock has vaulted over 70% so far this year to lead the

Dow Jones Industrial Average

.

The latest spurt of optimism came when investors began to discuss the possibility of a global alliance between GM and Nissan-Renault, but when Tracinda came out publicly in support of the deal, the old wounds between Wagoner and his largest shareholder seemed to reopen.

Observers talked about the potential for synergies and cost-savings that could be achieved in a deal between the two companies. It was viewed as a match that could ultimately counter the trajectory of

Toyota

(TM) - Get Report

, which is poised to overtake GM as the world's largest automaker soon.

But Wagoner expressed little enthusiasm about the deal initially. He later denied any opposition to the idea, but it seems only natural that teaming up with a rock star auto executive, Renault-Nissan CEO Carlos Ghosn, at the behest of an activist shareholder that had already challenged his leadership would hold little appeal for him.

Media reports indicating that Kerkorian had lost faith in Wagoner and Wagoner privately disapproved of the proposed alliance stoked public speculation that a conflict was brewing.

When Ghosn and Wagoner met in Paris last week to discuss a deal, it grew apparent that they were far apart due to GM's insistence that Nissan-Renault make a cash payment to it in order to consummate the proposed tie-up. Ghosn indicated to reporters after the meeting that Wagoner was resisting a deal, and he said that if negotiations failed, his company would explore an alliance with other U.S.-based automakers, such as

Ford

(F) - Get Report

.

At that point, Tracinda said in a filing that it planned to purchase up to 12 million more shares of the automaker, which would give it more than a 10% stake. He also re-emphasized his support for the Nissan-Renault deal.

Wagoner fired back this week by cutting off negotiations with Ghosn before the mid-October deadline. He said he had the full support of his board of directors, and the move appeared to be a triumph for the CEO, whose turnaround efforts had gained the board's the stamp of approval.

Tracinda expressed disappointment with Wagoner's approach to the negotiations.

"We believe that General Motors' participation in a global alliance with Renault and Nissan would have enabled General Motors to realize substantial synergies and cost savings," Tracinda said. "We regret that the board did not obtain its own independent evaluation of the alliance."

Now, with York's resignation, E.K. Riley Advisors analyst Robert Toomey says the stage is set for a fight, and Tracinda's revised plan to not add to its stake in GM could easily be reversed.

"

Tracinda is going to do whatever it wants to do," says Toomey. "They may not want to invest anymore today, but they could change their minds tomorrow, so this could be a sign that more drastic action is in store at GM. That could be a good thing."