Chrysler Says It Will Review Procedures : Autos: Move may lessen pressure from Kirk Kerkorian in proxy fight.

In a guarded response to investor Kirk Kerkorian, Chrysler Corp. said Thursday that it would undertake a three-month review of its corporate governance procedures and the makeup of its board of directors.

Chrysler Chairman Robert Eaton said the steps are in part a response to several demands from Kerkorian, the company’s largest shareholder. But at the same time, Eaton appeared to dismiss most of Kerkorian’s proposals.

The action appears to lessen prospect of an immediate proxy battle between Kerkorian and Chrysler’s management. “It buys them some time,” said Maryann Keller, an analyst with Furman Selz in New York.

Kerkorian, who controls 14.1% of Chrysler stock, last week asked for representation on the Chrysler board, an independent review of its cash reserve policy and a relaxation of the auto maker’s anti-takeover defenses.

In a carefully worded statement, Eaton gave little hope that the company would embrace any of Kerkorian’s major demands. The company’s only concession was possible adoption of an anti-greenmail bylaw.

“They’re not giving them much,” said a source close to Chrysler management.

Jerome York, vice chairman of Kerkorian’s Tracinda Corp., said in a statement that he was pleased the board appears to be taking the proposals seriously and hoped to have a “constructive dialogue” with Chrysler.

But a Tracinda spokesman added that it will become quickly clear if the Chrysler board is just engaging in a “con job.” If so, Kerkorian--who launched an unsuccessful $22.8-billion takeover bid in April--will consider other options including a possible proxy fight.

The review of the company’s corporate policies will be conducted jointly by the board and senior managers in consultation with Chrysler’s major shareholders.

The study will “evaluate whether incremental changes would be in the long term best interest of the company and all its shareholders,” Eaton said. He added that the company wants to be responsive to shareholder suggestions while ensuring no single shareholder gain undue influence.”

While the board will consider Kerkorian’s request to appoint York, a former Chrysler chief financial officer, and two other Tracinda-approved representatives to Chrysler’s 13-member board, Eaton said the board believes that “all directors should represent the interest of all shareholders.”

Eaton also showed little interest in altering the company’s poison pill provision, which dilutes the holdings of any shareholder who accumulates more than 15% of the company’s shares. And he said the company already has adequate restrictions on the board’s ability to issue preferred stock, which could be placed in the hands of investors friendly to management.

Eaton also said there was no reason to have an independent committee determine the adequate cash reserves for the company. Eaton has targeted $7.5 billion, while Kerkorian maintains $4.5 to $5 billion is adequate.

The board will consider adoption of an anti-greenmail provision that would prohibit the company from paying hostile shareholders above market prices for their shares. Kerkorian had proposed the measure to counter Chrysler’s arguments that he was seeking greenmail.