Mark Tran
When Kirk Kerkorian started buying shares in Chrysler in December 1990, his closest advisers feared that the famously reclusive corporate raider had gone senile.
James Aljian, who had worked with him for 25 years, declared it was “the stupidest thing I ever heard” and Alex Yemenidjian, Kerkorian’s right-hand man, thought: “He’s finally lost it.”
This week, 81-year-old Mr Kerkorian, who recently became a father for the third time, had cause for celebration as Daimler-Benz announced a 55-billion merger with Chrysler. He has seen the value of his 13,74% stake swell to more than $5-billion – triple his original investment.
The merger also provides a vindication of sorts for Kerkorian, vilified for his attempted takeover of Chrysler for $23-billion in 1995. He was accused of wanting to loot Chrysler’s cash reserves of $6,4-billion, money set aside for the inevitable downturn.
But Kerkorian argued that management was being too cautious and $5-billion should be pocketed by shareholders such as himself. He also wanted Chrysler to form alliances and diversify globally, an argument that turns out to have been prescient, although it may have been just a self-serving pretext.
His association with Chrysler began in 1990, when he bought 22-million shares for $272-million. Little was expected of the stock. It was Lee Iacocca, then the flamboyant chair, who caught Kerkorian’s eye. The two had met in 1989 at a Florida racetrack. According to Yemenidjian, they hit it off immediately. Iacocca remembers Kerkorian saying to him: “I’ll bet $300-million on you.”
By 1993 he owned about 9%, with the stock trading at $63 in January 1994. Iacocca left in 1992 and although Kerkorian declared his “very high regard” for Chrysler’s management, now led by Robert Eaton, a more self-effacing figure than Iacocca, he was becoming restless. Towards the end of 1994 the share price tumbled, amid investor worries over a slump in car sales the next year.
In April 1995, Kerkorian revealed his $23-billion bid for the company, a coup de thtre that topped anything in his career as a corporate raider. The denunciations followed.
“I think what Kerkorian is doing … is totally destructive,” said Felix Rohatyn, respected Wall Street financier and now United States ambassador to France. “It is a very short- term attempt to destabilise a company at the expense of its long-term interests.”
That about summed up sentiment on Wall Street and among Chrysler’s workers, who were regaled with tales of Kerkorian’s buccaneering past. His bid collapsed ignominiously within a few weeks. Nobody stepped forward with the $12-billion he needed to raise.
Even more humiliating, Bear, Stearns, his investment bankers, abandoned him after pressure from Chrysler. But Kerkorian eventually reached a peace agreement with Chrysler in 1996 that gave him a board seat.
Often compared to Howard Hughes, Kerkorian once said his credo was: “Work like you’ll live forever. Play like you’ll die tomorrow.”
He has owned airlines, the MGM/United Artists Hollywood studio and a handful of hotel- casinos, including the MGM Grand Hotel and Casino, an emerald-green monstrosity in Las Vegas, also headquarters for Kerkorian’s Tracinda company, named after his daughters, Tracy and Linda.
Kerkorian’s father was an illiterate Armenian immigrant who became a millionaire landowner in California, then went broke. Kerkorian spent his childhood selling newspapers, working as a golf caddy and picking melons. He tried boxing, winning 29 out of 33 bouts as an amateur and earning the nickname “Rifle Right Kerkorian”.
During World War IIhe made good money as a flight captain for the Royal Air Force in Canada, delivering Canadian-built Mosquitoes to England. After the war he made millions in airlines, before plunging into the movie business where a dizzying array of deals made him a billionaire.
Hollywood also gave him the reputation as a predator and a wrecker. It is the only topic that causes the usually unflappable Kerkorian to lose his cool. His seemingly endless transactions at MGM/UA prompted Peter Bart, a former MGM executive and now editorial director at Variety magazine, to describe him as someone who “transformed corporate demolition into a high art”. Kerkorian’s executives say the studio was a mess to begin with.
It was in a bigger mess by the time he walked away with $1-billion, leaving behind a debt-laden studio. The various lawsuits were settled, precluding a public airing of the 1990 sale of MGM/UA to shady Italian financier Giancarlo Parretti.
Another Hollywood foray brought him his one big mistake. In 1978 he bought 5,5% of Columbia, but an expected takeover was halted by his signing an agreement not to take his stake above 25%. But a series of legal disputes was only settled in 1981 when Columbia bought Kerkorian’s shares at 50% above market price, making him $70 million profit.
A year later Coca-Cola acquired Columbia and the company’s shares have since risen by more than 1 000%. Had he kept his stake, Kerkorian would have made about $5- billion.
Those days are behind him. Now he can revel in a turn of events that makes his criticism of Chrysler seem on the mark, particularly the complaint that the company was too weak in overseas markets. He has shown he can have long-term goals, holding on to his Chrysler stake for eight years.
He will never be mistaken for Warren Buffett, the Sage of Omaha who sells his shares as rarely as Kerkorian gives interviews. But the former flyer, boxer, airline owner and movie mogul seems content with cars and hotels in his old age.
nKerkorian once flew his private jet to the Middle East where an Arab oil prince admired it. Kerkorian sold it to him on the spot
nHis last press interview in 1971 was to deny associations with the Mafia because of a tape recording of him talking to Charlie “The Blade” Tourine, a reputed enforcer with the Genovese family
nAfter “semi-reform school” a jobless Kerkorian joined Franklin D Roosevelt’s New Deal Civilian Conservation Corps toiling in the countryside. One of his first wage-paying jobs was as a labourer on the MGM backlot.