First, the details. The road to compromise began in December, when Eaton called Kerkorian and suggested peace talks. Kerkoriarn’s goals then were the same as they’d been throughout the battle: that Chrysler share some of its cash hoard with its shareholders, reduce its anti-takeover provisions and give Kerkorian designees board seats. The two sides made little headway until late January, when Eaton and Kerkorian met in Beverly Hills for dinner. There they planted the seeds for a deal in which Kerkorian would get to put one of his cronies on Chrysler’s board, but it wouldn’t be his main man York, whom Eaton loathes. After a flurry of faxes and conference calls, the final details were ironed out by York last week in secret meetings at Chrysler’s air terminal in Pontiac and at the Townsend Hotel in Birmingham, Mich. The terms: Kerkorian agrees not to increase his 13.8 percent stake in Chrysler for five years or to mount another takeover attempt. In return, his aide James Aljian gets a seat on Chrysler’s board, and Chrysler will lower its anti-takeover defenses and buy back an additional $2 billion in stock over the next two years.
Publicly, both sides talked of the great compromise, and sources familiar with the deal say they’d agreed that neither side would claim victory. But in some corners of the Kerkorian camp the boasting couldn’t be contained. One source claims that putting York forth as the “nonnegotiable” board candidate had been a strategic move meant to gain leverage. Posturing aside, Kerkorian-and all of Chrysler’s shareholders-made out like bandits during the battle as the carmaker boosted its dividend and announced billions in stock buybacks, causing its shares to rise 40 percent. Chrysler’s prizes from the peace treaty: eliminating the threat of Kerkorian’s causing trouble, keeping his hands off its cash and allowing him to put only his second-choice candidate on the board.
And what about the other players in this clash of the corporate titans? Retired Chrysler boss Lee Iacocca, who lost whatever remaining friends he had in Detroit by siding with Kerkoriarn’s team, gets reimbursed for the $53 million in stock options Chrysler had refused to let him cash in and agrees to part company with Kerkorian. John Neff, the recently retired investment guru at Wellington Management -one of Chrysler’s largest shareholders-gets a seat on Chrysler’s board. And then there’s York, who’s earned $40 million-plus for six months of work as Kerkoriarn’s strategist-for-hire. Sources say he’ll continue advising Kerkorian and Aljian on Chrysler matters and help to put Kerkoriarn’s fortune to work in other “undervalued situations.” Translation: look for the Kirkand-Jerry Show to take the stage at another big-name company– and quickly start talking tough with another board of directors. “That’s a possible outcome,” a source says. Whoever the chief executive of that unlucky company is, he can be comforted by one thought: Bob Eaton feels your pain.
