Kerkorian to Boost GM Stake

The move turns up the heat for a deal with Nissan and Renault.
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Updated from 10 a.m. EDT

One day after the head of

General Motors

(GM) - Get Report

met with the competition in private to discuss a deal, the company's foremost shareholder activist weighed in on the high-profile negotiations in public.

Billionaire investor Kirk Kerkorian indicated in a regulatory filing Thursday that his firm, Tracinda Corp., plans to buy up to 12 million more shares of the world's largest automaker; this would give it more than a 10% stake.

Currently, Tracinda owns 56 million shares of GM, representing a 9.9% stake in the company. Crossing the 10% threshold would require the firm to seek a variety of regulatory approvals, because GM owns banking and insurance interests. In a letter to GM's CEO, Rick Wagoner, Tracinda said it wants to add around 6 million shares to its stake, and it may consider buying up to an additional 6 million shares.

Kerkorian also reiterated his public support of the highly publicized negotiations between Wagoner and Carlos Ghosn, the CEO of

Renault

and

Nissan

, about forming a global alliance between the three companies. The move comes amid media reports that Kerkorian is dissatisfied with Wagoner's leadership and GM's restructuring efforts.

"Tracinda continues to believe that a strong opportunity exists in a potential alliance between General Motors, Renault and Nissan and that there should be strong General Motors Board involvement in the analysis of such a potential alliance, including the utilization of independent advisors," said Tracinda in the letter that outlines its investment plans.

According to

The Wall Street Journal

, Wagoner initially was opposed to the idea of forming an alliance, and he is now demanding a large cash payment from Renault and Nissan for GM shareholders in order to strike a deal.

Wagoner and Ghosn met in Paris on Wednesday, on the eve of the Paris Motor Show. Afterwards, GM announced that no agreement was reached, but the two sides will continue to evaluate a deal until mid-October.

According to several media reports from Paris, Ghosn hinted to reporters after the meeting that GM was resisting a deal, and he said that if talks broke down, he would turn to other automakers in North America, such as

Ford

(F) - Get Report

, about forming an alliance.

If Wagoner allows Ghosn to turn to Ford, that could hurt relations between him and Kerkorian and possibly set the stage for a fight over control of the company as Tracinda builds up its ownership.

Tracinda already succeeded in installing its representative, Jerry York, onto GM's board after York was publicly critical of the company's approach to its restructuring efforts. Since York's board arrival in February, GM slashed its dividend payment in half and agreed to sell off majority stakes in its residential mortgage and financing businesses. The company also executed a massive employee-buyout plan, and now it's flirting with Ghosn about an alliance.

Meanwhile, shares of GM have led gains on the

Dow Jones Industrial Average

in 2006, up 71% so far this year. Recently, its shares were up 71 cents, or 2.2%, to $32.99.

"We are seeking the cooperation and support of the Company and its management in connection with these filings and any related proceedings, as we believe additional investment by Tracinda in GM would be viewed positively by investors, and your support will maximize the likelihood of obtaining regulatory approval," Tracinda said in its filing.

In a statement, GM said Tracinda informed the company of its plans for the filing last night.

"We are reviewing the filing made by Tracinda and have no further comment at this time," the automaker said.