Chrysler Ex-CFO Calls for GM Cuts

Jerome York calls General Motors an ''operationally sound company,'' but he maintains that the struggling automaker should do more to reduce costs ...
Stephen TaubJanuary 10, 2006

Kirk Kerkorian’s right-hand man, former Chrysler Corp. finance chief Jerome York, called for sweeping cost cuts at General Motors Corp., according to Bloomberg.

In a speech to analysts in Detroit, York called the auto giant an “operationally sound company” and gave it credit for making progress in lowering costs and increasing productivity, the wire service reported. He reportedly added that Kerkorian, who owns 7.8 percent of GM’s shares, may buy back 12 million shares he sold last year, plus 12 million more.

York reportedly maintained, however, that the struggling automaker should do more to reduce costs immediately — namely, slice its dividend in half and institute “substantial” pay cuts for senior management. According to Bloomberg, York also said that GM should sell its Saab brand and consider getting rid of its Hummer division, calling them “distractions.”

York is the chief executive officer of Harwinton Capital Corp., a private investment company he founded in 2000. He currently sits on the boards at Apple Inc., Tyco International Ltd., and Exide Technologies Inc., and he is also a former CFO of IBM Corp.

The veteran numbers-cruncher reportedly estimated that the company has about 1,000 days left before it runs out of money. “GM needs to husband every penny of cash they can to get through the restructuring,” York insisted.

The speech came the same day that GM announced it would cut the sticker prices on all Chevrolet, Buick, and GMC models, and most Pontiac products, according to MarketWatch. “We are going to be more, let me say, judicious in our use of incentives. And we think this is going to get the focus back on the product,” Rick Wagoner, chairman and chief executive officer, told reporters at the Detroit auto show.

John Novak, an auto analyst at Morningstar Investment Services, told Bloomberg, “We think ultimately [GM] will cut the dividend.” Added Novak, “It won’t be because Mr. York is requesting it, but rather it’s a way that they can send a message [to the United Auto Workers] that ultimately the management and shareholders are sharing in their pain.”