Tracinda Exec Takes Softer Stance on Chrysler Battle

Jerome York, vice chairman of Kirk Kerkorian’s Tracinda Corp., said Tuesday that he hopes to reach a settlement with Chrysler Corp. over board membership and other issues that would avoid a messy proxy fight.

The statement came in an unusually upbeat, conciliatory speech before a group of auto analysts and executives who have gathered here this week for the North American International Auto Show.

However, York continued to press Kerkorian’s case that the auto maker can afford to be more generous to stockholders without crimping its future. He said Chrysler could earn as much as $9 a share in 1996, roughly a third higher than 1995’s results are expected to be, and that its strong cash flow could be used to buy back $2 billion in stock every year until the next recession.

York, a former Chrysler chief financial officer, joined Kerkorian’s forces in September and has since led efforts to force the auto maker to take steps to boost stockholder value.

Kerkorian, Chrysler’s second-largest stockholder, who failed in a $22.8-billion takeover last April, has demanded that York and two other unnamed allies be appointed to the auto maker’s board. He also wants the company to ease its takeover defenses and buy back more shares or raise the dividend.

Tracinda, operator of the MGM Grand Hotel & Casino, has held out the threat of a proxy contest this spring against Chrysler management. While that option remains, York said Tracinda prefers to avoid such a costly battle.

“Our hope is we will end up reaching a negotiated settlement with Chrysler because we think that is substantially better for everyone,” York said in an interview after his speech before the Society of Automotive Analysts.

Chrysler executives declined to comment on York’s speech. But its tone prompted some analysts to speculate that Kerkorian was getting little support from institutional investors and was backing away from a proxy contest.

“There’s no way he can win a proxy fight,” said one New York institutional investor. “It’s empty talk.”

Tracinda will decide whether to launch a proxy fight after Chrysler’s board finishes a study of the company’s corporate governance and financing policies. The report is due in early February.

In recent months, both sides have been highly critical of each other. York has questioned Chrysler’s conservative management, quality record and corporate governance policies. Chrysler characterizes Kerkorian as a greedy opportunist and corporate raider who has decimated other takeover targets.

On Tuesday, York went out of his way to praise Chrysler’s recent record. He said Chrysler has undergone a major resurgence since 1990 and that its strong lineup of minivans, sport-utility vehicles and other light trucks gives it a huge profit advantage over competitors.

York said this means the company--given a strong sales market and good management--cannot only afford to pay for future product development, international expansion and maintain a strong balance sheet, but it can also take steps to enhance shareholder value.

In the last year, Chrysler has raised its dividend five times, bought back $1 billion in stock and began another $1-billion buyback. But York said the company should increase the buybacks to $2 billion a year, consider more dividend increases and sell non-automotive assets, delivering the proceeds to shareholders.

He said the company could do all that without tapping its cash reserve, which he argues is $2 billion too high.