Chrysler Puts Buyback Plan in High Gear : Autos: The action is taken on the heels of Kerkorian’s latest moves toward a buyout bid.

Under pressure from its largest shareholder, Chrysler Corp. on Thursday accelerated a major stock buyback plan, saying it would double to $2 billion the value of shares it would repurchase by the end of 1996.

The company’s board of directors took the action just two days after investor Kirk Kerkorian hired former Chrysler Chief Financial Officer Jerome York, a step that fueled speculation that Kerkorian is preparing a new buyout bid for the nation’s No. 3 auto maker.

Investors reacted positively to the buyback and Chrysler’s stock continued its recent surge. The stock closed Thursday at $57.75, up 87.5 cents in heavy trading on the New York Stock Exchange.

“It’s great that they are buying the stock back,” said Seth Glickenhaus, a Chrysler stockholder and owner of a New York money management firm. “It shows that Kerkorian in a quiet way is having an effect on the company.”

While the expanded buyback was not a surprise, analysts said Kerkorian’s recent moves forced Chrysler to speed up the process in an effort to dissuade major investors from aligning with the Las Vegas billionaire.

“Chrysler was probably going to do this anyway,” said analyst David Healy of Burnham Investment Research. “But the recent news by Kerkorian accelerated their plans to do it.”

Chrysler Chairman Robert Eaton told shareholders at the company’s annual meeting in May that the board would consider repurchasing more stock, but only after completing the $1-billion share buyback begun in December. To date, Chrysler has spent $709 million to repurchase its stock.

“We’ve consistently said that we would return to our shareholders anything in excess of the cash we believe we need on hand to run the business,” Eaton said in a statement Thursday.

He said strong demand for Chrysler’s new products is a factor in the decision to increase the stock buyback. The company’s sales were up 4% in August, though they are down 3% for the year.

The company had $6.9 billion in a cash reserve as of June 30. Previously, Eaton said Chrysler needs $7.5 billion to ride out the next economic slump.

Kerkorian, owner of Tracinda Corp. and MGM Grand, has made Chrysler’s cash hoard a point of contention. In making an unsuccessful $22.8-billion buyout bid earlier this year, he argued that the company needs only about $2 billion in reserve.

Tracinda attorney Stephen Silbert said the stock buyback is a positive development but did not go far enough. He would not elaborate, but Kerkorian previously sought an increase in the annual dividend from $2 to $5 a share. “This is a tiny step in the right direction,” Silbert said.

Kerkorian and his associates, including former Chrysler Chairman Lee Iacocca, own 14.1% of Chrysler shares. Since Kerkorian withdrew his $55-a-share offer for the company, he has been exploring other options to influence or gain control of the company.

On Tuesday, Kerkorian hired York, most recently chief financial officer of IBM Corp., to be vice chairman of Tracinda. York had worked at Chrysler for 14 years, leaving after he was passed over for the top job when Iacocca retired several years ago.

In filings with the Securities and Exchange Commission, Kerkorian said he may seek to have York appointed to Chrysler’s board and may mount a proxy solicitation to gain control of the board.

York, a hard-nosed cost cutter with an intimate knowledge of the auto industry, brings credibility to Kerkorian’s efforts. York is close to Chrysler’s lenders and institutional investors, including FMR Corp., the parent of Fidelity Investments, which owns 13% of Chrysler’s shares.

The battle for control of Chrysler has been bitter. The company retaliated against Iacocca, refusing in July to allow him to exercise options for 1.5 million shares valued now at more than $40 million.

According to sources, Chrysler and Iacocca are negotiating a compromise in which he would be allowed to cash in part of his options in exchange for withdrawing his support for Kerkorian.

Chrysler officials would not comment on whether the issue was discussed at Thursday’s board meeting.