When Jerry York shook up GM
Jerry York always loved to play the subversive, the man behind the scenes who manipulated the levers of power.
The last time I saw him, 18 months ago, it was a vintage York moment. We met in a nearly deserted restaurant in Bloomfield Hills in mid-afternoon. He was dressed in a black mock turtleneck and a sport jacket, perfect cover for his confidential role as auto industry wise man. At any moment, the conversation felt like it could have turned to blind drops and safe houses.
As usual with York, the meeting was off the record. Most of it revolved around Ford, where he had just parked a chunk of Kirk Kerkorian’s assets. But York reserved his most pointed comments for then-General Motors’ CEO Rick Wagoner and lead director George Fisher.
He was angry that they had ignored most of his suggestions: that they ditch Saab and Hummer, cut the company dividend, and slash UAW health and board payments. Later of course, after York left GM’s board, they would reverse course and accept them.
But worse, in York’s opinion — they had used corporate trickery to sabotage a deal that he had cooked up to push GM into the Renault-Nissan alliance. Wagoner and Fisher, York declared with vehemence, were "evil men."
Now Jerry York has died at the age of 71 after suffering a massive cerebral hemorrhage. His career in the auto industry was mostly over, but while he was active, he was a skilled player of the inside game — and a very effective one at that.
York was no car guy. A southerner, he attended West Point and in the early years of his business career, he found time to get married four times. By the 1980s, he had made his way to Chrysler where he was Lee Iacocca’s chief financial officer. After a stint as the CFO of IBM (IBM, Fortune 500), he returned to the auto industry in a new role — that of investor and gadfly — after joining Kerkorian’s Tracinda Corp. in 1995.
At the time he was stricken, York was chairman and CEO of Harwinton Capital, a private investment company that he controlled, and a member of the board of directors of three companies: Dana Holding (DAN, Fortune 500), an auto parts manufacturer, Tyco International (TYC), and Apple (AAPL, Fortune 500).
His big moment came after Kerkorian bought 9.9% of GM’s stock in 2006 and York joined GM’s board. At the end of June, he launched a surprising initiative. He suggested that Renault, which had scored a big success turning around Nissan, acquire a 20% stake in GM and try to repeat the trick.
York had already obtained the cooperation of Renault-Nissan CEO Carlos Ghosn, who was as attracted to the challenge of rescuing GM as York and Kerkorian were to the potential payoff no teletrack payday loan. According to one analysis, the tie-up might have produced as much as $10 billion in operating profits for GM.
Wagoner, of course, was unenthusiastic about the deal. Exactly what would happen to him or his team with Ghosn on the premises — or how the two would coexist — was left unclear. But York’s control of Kerkorian’s shares left the GM CEO with no choice but to at least pay lip service to the idea.
After several months of study, the alliance deal was scuttled. GM had demanded cash compensation for what it said was the unequal division of synergies from a tie-up. Meanwhile Renault-Nissan refused to make any payments, saying that would be incompatible with the spirit of the alliance.
York was furious. Believing that GM’s condition was hopeless, he quit the board and directed Kerkorian to sell his stock. The Las Vegas financier got out just in time, disposing of many of his shares for $33 apiece. Three years later, GM’s stock was worthless, and it went into bankruptcy.
York wasn’t done. Under his advisement, Kerkorian, who’d scored big with a Chrysler investment in the 1980s, and then attempted a hostile takeover in the 1990s, made another try at buying the automaker from Daimler in 2007. The bid failed, and Chrysler was sold to Cerberus Capital Management. In 2008, Tracinda started buying shares in Ford (F, Fortune 500), but then its price collapsed in the face of an industry recession, and Kerkorian started selling his shares six months after they had lost two-thirds of their value.
York remained a favorite source for journalists because of his insider knowledge and unfettered opinions. In a response to an email just a few days ago from my CNNMoney colleague Chris Isidore, asking about the condition of GM under its new CEO, he did not mince words.
"About the only thing they seem to have going for themselves is that Toyota is wounded," York opined. "Other than that, Ed Whitacre continues to churn the organization as if it is a short cycle business."
Jerry York knew the auto business as well as anybody, and he could be scathing in his opinions about those whom he didn’t think were up to the task of managing it. He cut a unique figure and there appears to be nobody on the current scene who can do it as well as he could.
Filed under: finance by Forest