Eaton Revs Up Response : Chrysler Chief Lashes Out at Kirk Kerkorian

Chrysler Corp. Chairman Robert J. Eaton launched a strong attack Tuesday on renegade stockholder Kirk Kerkorian, saying the time had come to speak out against a “negative campaign” hurting the auto maker.

Eaton accused Kerkorian, Chrysler’s largest stockholder, of trying to harass and discredit the auto maker’s management as part of an effort to enrich himself at all costs after a failed takeover bid.

His speech to a group of large investors, along with an ad campaign begun this week, marks a new aggressive tone in the No. 3 auto maker’s effort to defend itself against Kerkorian.

“We don’t know how many car and truck sales we may have lost from this negative campaign already. And the mudslinging has just started,” Eaton told the Council of Institutional Investors, a group of pension funds that collectively own a 25% stake in Chrysler.

“We will respond intelligently and aggressively to any move he makes that we do not believe would be in the best interests of all the shareholders,” he said.

The council’s support for Eaton is critical in what has emerged as a prolonged battle for Chrysler by Kerkorian, a reclusive Las Vegas multibillionaire who says he only wants better value for shareholders.

In a statement released after Eaton’s speech, Kerkorian’s Tracinda Corp. reiterated that claim.

“Our long-held objective is to enhance value for all shareholders--and our actions to date have helped increase the value of Chrysler’s over 380 million shares by billions of dollars,” said the statement by Jerome B. York, a former Chrysler finance chief recently hired by Kerkorian.

Chrysler shares fell $1.875 to close at $51.375 on Tuesday on the New York Stock Exchange. That’s up from less than $40 when Kerkorian announced his takeover bid last spring.

In his speech, Eaton likened York to a hired gun. York was once passed over for the top job at Chrysler, jumped ship to IBM and quit to become a top Kerkorian aide last month.

Within a few days after Kerkorian hired York, the Chrysler chairman said, “there was a well-directed attack against the company, its management and its products, and it was launched with York as the front man.”

Eaton further accused Kerkorian of trying to “drive a wedge” between himself and his No. 2, Chrysler President Robert Lutz.

“Now, we know that Kerkorian has no real knowledge about these issues and no real basis for complaint,” Eaton said. “His objective is personal gain, no matter how it’s dressed up.”

The 300-member audience for Eaton’s speech appeared to be friendly and receptive.

“We’re gratified to hear that he would stand in front of an investor group and pledge that shareholders’ interests are paramount,” said James Burton, chief executive of the California Public Employees Retirement System, the biggest U.S. pension fund. It owns about 1% of Chrysler.

Eaton’s speech came a few days after Chrysler’s latest salvo at Kerkorian--a nationwide ad campaign defending the auto maker’s record. The ads, which don’t name Kerkorian, say the company will not let “someone else decide Chrysler’s fate and steer it off into another direction.”

Eaton and the ads make a point of defending Chrysler’s large cash reserves as benefiting shareholders by insulating the auto maker from the industry’s next slump. Kerkorian has criticized the cash reserve.

Since launching a takeover try that faltered on lack of financing, Kerkorian has kept the auto maker under constant pressure by adding 14 million shares to his holdings and hinting that Tracinda wants a seat on the Chrysler board and more stock. Kerkorian and his associates control 14.1% of Chrysler’s stock.