Kerkorian Keeps `Em GuessingDavid Woodruff
At Chrysler Corp., the omnipresent question is this: What will Kirk Kerkorian do next? For five months, the Las Vegas gambling mogul has hovered with his 13.6% stake in the carmaker. Even after abandoning his underfinanced $20.5 billion acquisition bid in May, his presence continues to rattle managers and investors.
On Sept. 5, Kerkorian played his latest card: hiring Jerome B. York, chief financial officer at IBM and a 14-year Chrysler veteran. York becomes vice-chairman of Tracinda Corp., Kerkorian's investment vehicle. More important, he may be Kerkorian's choice to run Chrysler, if the moribund takeover bid is resuscitated. One Kerkorian intimate says that the billionaire investor is still contemplating a proxy solicitation to attempt to gain control of Chrysler's board or to force dividend increases or stock buybacks.
York, 57, gives Kerkorian a formidable boost. A proven cost cutter and crisis manager, he was a key architect of IBM's $8 billion cost-cutting plan and a leader of Chrysler's early-'90s crusade to chop $4 billion in operating costs. During his years at Chrysler, he ran the company's Mexican operations, was general manager of the Dodge division, and was briefly one of the company's top engineers. "He does add some credibility" to Kerkorian's demands on the company, concedes one Chrysler executive.
LONG ODDS. That may be crucial, since York's former boss, Lee A. Iacocca, could soon sever his ties with Kerkorian. Iacocca has supported Tracinda's bid from the beginning. But now, he is negotiating with Chrysler directors to regain access to stock options that are worth approximately $40 million. In return for freeing the options, directors are demanding Iacocca cut his alliance with Kerkorian. Directors could vote on Iacocca's request as early as Sept. 7.
Even with York, however, the odds of Kerkorian's taking control of Chrysler remain long. Financing for the buyout, now valued at roughly $24 billion, is still in question. And even though a proxy fight might put York on Chrysler's board, electing an entire York-led majority slate of new directors would be much more difficult. Analysts, meanwhile, expect strong sales of Chrysler's new minivans to kick-start profits over the next year. Investors "would have to think twice about throwing out current management, given what they have done," says Robert S. Miller, former Chrysler vice-chairman and now CEO of Morrison Knudsen Corp.
York, who declined to discuss his new job, will be well paid in any case: He is to receive a percentage of the gain on Tracinda's Chrysler shares, an arrangement already worth $20 million. Generous, yes--but Kerkorian certainly can afford it. He added a cool $130 million to his own paper profit when Chrysler's stock jumped by $2.50 a share, to 571/8, the day of York's hiring. That's enough to hire several Jerry Yorks--and still have some cash left over.