Kerkorian's Axman Cometh
By David Welch
Count Jerome York, former chief financial officer for both Chrysler and IBM (IBM ), among the breed of hard-charging executives who revel in the role of Mr. Fix-It. Although York has been running his own private investment firm since 2000, he surfaced in early May as billionaire Kirk Kerkorian's top deputy in his play to grab a 9% stake in General Motors (GM ). Wall Street figures York and Kerkorian -- the same guys who made a hostile bid for Chrysler in 1995 -- aim to boost GM's value by cutting costs and selling noncore businesses.
If Kerkorian has his way, GM execs will likely be seeing a whole lot of York. Sources close to Tracinda, Kerkorian's private investment firm, expect the boss to want a say in GM's turnaround plan. If management doesn't listen, Kerkorian may try to get York a board seat.
While York declined to comment, friends and associates say that if that happens, the 66-year-old dealmaker and cost-cutter will lose no time making his views known. Says former Chrysler President Thomas T. Stallkamp, who was a purchasing manager during York's CFO stint: "If he got on the board, he'd ask questions that, as management, you don't want to be asked."
BIG BLUE'S BLOAT.
Asking difficult questions is a big part of York's MO. Thanks to a reputation as a tough cost-cutter earned at Chrysler in the '70s and '80s, he was among the first executives Louis V. Gerstner Jr. turned to in 1993 to help save the then-struggling IBM. York was soon wondering aloud why IBM was spending millions of dollars a year developing its OS/2 operating system to compete with Microsoft's (MSFT ) ubiquitous Windows. At one meeting, he asked if anyone could recall a time when a company with a 4% share in a segment felled a rival with an 80% share. No one could. In 1995, IBM dumped OS/2.
Few areas were too small for York to probe. He set up a task force to find out why IBM had so many different sizes of envelopes for internal mail. He centralized finance, forcing division managers who had virtual carte blanche to get his O.K. before making any investments. One former IBM exec recalls colleagues shaking when pitching York, a West Point grad whose bluntness and use of profanity was legendary. Such moves eventually helped IBM trim $8 billion in costs.
As an outside investor or director, York won't be able to micromanage at GM in the same way. But he's likely to show up with a long list of questions for Chairman and CEO G. Richard Wagoner Jr. Why does GM need eight brands to serve 25% of the U.S. market when Toyota holds nearly 14% share with just three? And what about all that capacity? Analysts say GM's North American plants can build 5 million vehicles -- about 20% more than it needs.
Wagoner is eyeing several plants for closure, but York could push for more. And though GM has pared one-third of its salaried workforce since 2000, he's likely to probe the pace and scope of the plans.
York, described by associates as a finance guy with good car sense, knows enough about the business not to suggest rash cuts. When investment bankers tried to get then-CEO Lee Iacocca to sell Chrysler Financial in 1991, York drew the line. Says one ex-Chrysler exec: "Jerry knows you can't support a car company without a captive finance company."
While he's not likely to argue for a similar move at GM, few would be surprised if he pressed for a sale of noncore assets like the General Motors Acceptance Corp. mortgage and insurance units.
For all his successes, however, York hasn't had an unblemished career. His last effort to run a company -- he was CEO of computer seller Micro Warehouse from 2000 to 2003 -- ended badly. York and other investors paid $500 million for the company just before the computer market slumped. Two years later, they sold its assets for $190 million.
But no one expects Kerkorian and York to try to take over GM and actually run it. Instead, York will be riding herd on Wagoner & Co., questions ever at the ready.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.