GM Yields Board Seat

The automaker names Jerome York, adviser to Kirk Kerkorian's hedge fund, as a director.
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Updated from 5:21 p.m. EST

General Motors'

(GM) - Get Report

controversial dividend still has an unknown fate after the company's board of directors' meeting Monday, but Kirk Kerkorian's man in Detroit finally got his coveted seat at the table.

A company spokesman said GM has not announced a change to its dividend payments, which were widely expected to be discussed at the board meeting Monday. Reductions could be on the way, though, as Jerome York, a consultant to Kerkorian's hedge fund, Tracinda, was elected to the company's board. York will serve on the board's public policy and investment funds committees.

"I was expecting an announcement on the dividend today, so I was surprised that we didn't hear anything about it," says David Healy, an analyst with Burnham Securities. "They ought to cut it for tactical reasons, even though they can continue to pay it since they have enough liquidity. The addition of York on the board may still result in that."

Healy owns GMAC notes. His firm doesn't have an investment banking relationship with GM.

Shareholders were also expecting an update on GM's plan to sell part of its finance arm, GMAC. GM wants to free GMAC, the most profitable part of its business, from the burden of the parent company's bad debt ratings. The cash resulting from a sale could tide the automaker over as it struggles to reverse its plunging sales and earnings.

Kerkorian, the Vegas mogul who bought a 9.9% stake in the automaker last spring with a $31-a-share tender offer, had been in talks with GM for a seat on its board for months. At a recent auto industry conference, York had presented a controversial turnaround plan for the company that challenged the status quo. Now that he has a spot on the board, he is expected to further lobby for the plan.

York, on behalf of Tracinda, proposed a reduction to GM's $2-per-share annual dividend payments, a move that would save hundreds of millions of dollars. The dividend, though, is seen as one of the only compelling reasons to own GM stock these days. York also has proposed "substantial" reduction in payments and salaries for the company's top brass in order to project a spirit of "equality of sacrifice" to blue-collar workers and their union representatives.

Aside from the addition of York, GM also announced that

Merrill Lynch

(MER)

Chairman and Chief Executive E. Stanley O'Neal resigned his board seat. O'Neal cited increased time demands and potential conflicts of interest in matters where Merrill Lynch is involved with GM.

York has spent 30 years in the automotive industry, having worked at GM,

Ford

(F) - Get Report

and

Chrysler

(DCX)

. He has also served in management roles at companies in other industries, having worked at

IBM

(IBM) - Get Report

and

MGM Mirage

(MGM) - Get Report

. York also is a director at

Tyco

(TYC)

,

Apple

(AAPL) - Get Report

and

Exide Technologies

(XIDE)

.

Shares of GM were recently up 33 cents, or 1.4%, to $23.67 in after-hours trading.

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