ST. LOUIS -- Kirk Kerkorian wasn't here in person, but his presence certainly was felt, as Chrysler Corp. threw another couple of chips into the pot in its poker game with the high-stakes investor.
In another move designed to ward off Mr. Kerkorian's $23-billion hostile takeover effort, Chrysler tells more than 600 shareholders attending the mid-May annual meeting here it's boosting the quarterly dividend 25% from 40 cents to 50 cents per share effective July 14. It's the fourth dividend hike in the past 17 months and represents a 233% increase from 15 cents per share on Dec. 1, 1993.
Chrysler Chairman Robert J. Eaton believes Chrysler can sustain that payout level through the next down cycle, which many experts see coming in 1997. The Kerkorian forces described it as a very small step in the right direction, but neither he nor any of his sidekicks showed up.
Chrysler also hints it may expand its common stock buyback program after it completes a $1 billion repurchase program announced last December. Chrysler has repurchased $490 million of stock so far this year and expects to hit the target within the next few months.
Mr. Eaton took the offensive early in his remarks, saying the company isn't disappointed with the price of its stock, but pointing out that Chrysler's financial performance has outpaced its rivals and still is a good value for shareholders.
Chrysler's stock performance since 1989 has been the best among the top 20 on the Fortune 500 list, Mr. Eaton says. The company also has posted a return on equity, assets and sales since 1990 that is as good or better than General Motors Corp. and Ford Motor Co., he adds. Chrysler's improved financial performance has raised its credit rating and saved $743 million-plus -- an estimated $400 million in 1995 alone -- in interest on debt during the past three years.
"To say that we've been disappointed and frustrated over the past year is an understatement," Mr. Eaton says. "The frustration comes from the fact that there has been virtually no correlation whatsoever between corporate performance and stock price. You could make yourself a little goofy trying to figure out the psychology of Wall Street lately."
Mr. Eaton, nearly as cool as a riverboat gambler as he faced shareholders, also lobbied for support of a plan to hold $7.5 billion in cash reserves to fund future product programs during a downturn in the market.
"This is not just a rainy day fund," says Mr. Eaton. "When you live in a monsoon climate like the auto industry, you don't put away cash on the chance that someday it might rain. It will rain. You plan for it."
The latest dividend increase will cost the company about $40 million per quarter and could cut into some of that cash reserve, Mr. Eaton says. "But we expected that to go down on a seasonal basis," he adds. "Our target is to have that much going into the next recession."
