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NINETY EIGHT REGENCY

Kerkorian exec saw it coming

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Kerkorian exec saw it coming

Somewhere, Jerry York is smiling.

The two-time CFO and wannabe auto CEO spent a second career as billionaire Kirk Kerkorian's point man in Detroit. He tangled with them all -- Chrysler Corp. in the '90s, General Motors Corp. in 2005 and then three years later with Ford Motor Co., which he told Kerk would become a $15-a-share stock under CEO Alan Mulally.

In each case, the crusty ex-Marine saw value where others saw only long trails of capital destruction, management incompetence, corporate dysfunction or all three. All that was needed was the right kind of pressure. Ol' Jerry,

who died earlier this year, is being proven right:

Detroit, with a crucial assist at GM and Chrysler from Uncle Sam amid the global financial meltdown, increasingly looks to offer the kind of value that investors -- from Wall Street to executive suites in Italy -- want to own because these companies aren't what they were.

They're leaner and more realistically managed. Their product lines are sharper, quality is steadily improving and labor costs are more competitive. Their ability to generate cash, even at historically low sales rates, is impressive.

With no help from the feds, Mulally's Ford is on track to see its debt return to investment status after six years in junk territory even as Barclay's upgraded Ford shares Thursday and suggested they could reach $16 because of "compelling upside value."

That's huge for a company whose debt, along with GM's, slipped into junk territory in the spring of '05, confirmation that Detroit's wheels were coming off. York, who based Kerk's before-the-September 2008-crash stake in Ford on leadership, would have loved the turnaround taking place.

"The reason we're doing this is Alan Mulally," he told me two years ago, saying he'd explored with Renault-Nissan's Carlos Ghosn the chances for a tie-up with Ford (not good, so long as the Ford family controlled the company). Our chat, one of many, came roughly six weeks before Lehman Brothers' bankruptcy sparked a global financial panic that tanked equity markets -- including Kerkorian's stakes in Ford and gaming.

Chrysler, which he claimed would need a foreign partner to survive, not only got one in Fiat SpA. Detroit's No. 3 automaker effectively should become the North American arm of the Italian conglomerate by roughly this time next year, when Fiat is expected to up its stake in the company to 35 percent and offer shares in Chrysler through an initial public offering.

Why? Because CEO Sergio Marchionne, the antithetical auto boss, sees value (for him, anyway) in an American asset that the geniuses at Daimler AG effectively gave away to the geniuses at Cerberus Capital Management, the self-styled smartest guys in the room.

For short money, Marchionne and Fiat's controlling Agnelli family get the Chrysler, Jeep, Dodge and Ram brands, as well as a distribution network for Fiat and Alfa Romeo-brand vehicles in the United States and Canada. And Italy gets to keep playing a role in the global auto biz of the 21st century.

Could it all crash and burn? Sure it could. Car sales could run at recession-era levels for years. Demand for the IPOs of Chrysler and, sooner, GM could be lighter than people paid to predict such things are willing to admit.

The United Auto Workers, wowed by the net income and profit-sharing checks likely to come sometime next year, could amp its demands at next year's national contract talks and spoil for a fight with Ford. GM's fourth CEO in 17 months, Dan Akerson, could turn out to be a bust who thinks be knows more than he does.

All possible, but I wouldn't bet on it.

In his first on-the-record remarks, Akerson invoked a competitive lexicon of speed, winning, aggressiveness, leaning forward and moving quickly where his predecessors in Old GM would have defaulted to rationalization, cautious deliberation and continuing delay.

He said the "acid bath of bankruptcy" offered new opportunities that could be exploited to transform what critics call "Government Motors" into what he envisions as "Global Motors" -- preferably one that makes the kind of money Jerry York always figured it could.

From The Detroit News: http://detnews.com/article/20100917/OPINION03/9170344/1148/auto01/Kerkorian-exec-saw-it-coming#ixzz0zn6iIM14

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