DETROIT -- General Motors' board of directors elected to cut the dividend by 50 percent at its meeting on Monday, according to sources close to the board.
The move was just one recommendation that Jerry York, adviser to billionaire investor Kirk Kerkorian, called for during his speech to automobile analysts in Detroit in January.
GM's annual dividend is reportedly $1.1 billion, or $2 a share. The move, York argued, would help the company turn around and was embraced by many analysts. It also was seen as a move to show the UAW that all segments of the company would suffer financially as GM restructures.
But Merrill Lynch analyst John Murphy wrote in a note Monday that GM should use the dividend cut to win concessions from the UAW: "We would prefer to see the dividend remain intact until a time when it can be used directly as a bargaining chip."
Murphy disputed the argument that shareholders need to share the pain with workers making concessions. He wrote that falling stock prices already have socked investors with a $19.4 billion reduction in market capitalization since late 2003.
The last time GM cut its dividend was in 1992. At 8.3 percent, GM shares carried the highest dividend yield on the Dow.
GM reported a net loss of $8.55 billion in 2005.
The board also elected York to a seat on Monday. He will be on the Public Policy Committee and Investment Funds Committee.
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