  Mrjoshua Member Username: Mrjoshua Post Number: 754 Registered: 03-2005 Posted From: 69.209.160.53 |
This guy is the real deal. Driving Force Newest Director Shakes Up GM With Calls for Radical Change Jerome York Takes 'Deep Dive' Into Operational Details, Plays Key Role on Board Pressing Wagoner for Answers By MONICA LANGLEY March 20, 2006; Page A1 The Wall Street Journal DETROIT -- In recent weeks, General Motors Corp.'s newest director, Jerome York, has picked through the company's financial statements with the chief financial officer. He spent several hours looking over new engines and transmissions at a Pontiac, Mich., plant. And he met with GM's labor-relations executives to size up their tense negotiations with the United Auto Workers. In one meeting at GM, Mr. York offered a radical idea: "Why leave it to the union to communicate with our workers?" He urged executives to send GM news and negotiating positions directly to workers' homes for families to read, according to people familiar with the matter. GM historically has attempted to avoid agitating union leaders during labor talks.  But Mr. York is all about agitation. As GM wobbles from high costs and slumping sales, he is shaking up the auto maker from the inside. The 67-year-old former auto executive, who helped engineer turnarounds at Chrysler and International Business Machines Corp., has the backing of billionaire Kirk Kerkorian, who owns nearly 10% of GM's shares. Mr. York already has successfully pressed GM to take strong medicine such as halving its dividend and cutting top executive pay by 30%. (GM also cut director pay in half to $100,000 a year, as he had urged.) Equally important, Mr. York has quickly become a key force in the boardroom. Outside directors are increasingly looking to him to set the tone and agenda, particularly after the company said last week that it had discovered new accounting errors and would delay filing its annual report. GM said it will restate its earnings from 2000 to the first quarter of 2005 and is increasing its 2005 loss to $10.6 billion from the previously reported $8.6 billion. The figures have once again raised questions about the future of Chief Executive Rick Wagoner. Mr. York earned a big payday for Mr. Kerkorian and himself nearly a decade ago when Chrysler was sold for $37 billion to Germany's Daimler-Benz. Mr. York likes repeat performances: He's now building an exact duplicate of his Connecticut saltbox-style home in the Detroit area with his wife, whom he remarried. This time, with such high stakes for GM, Detroit is abuzz over Mr. York's new role. Is he the much-needed change agent who will fix the ailing auto maker? Is Mr. York willing to be just one of a dozen directors, or is he out to run GM himself? Mr. York has a powerful incentive to improve the auto giant and its stock. His contract with Mr. Kerkorian's company entitles him to 4% of any gains from Mr. Kerkorian's investment in GM. Based on the current size of Mr. Kerkorian's stake, that means Mr. York is due to get $2.2 million for each $1 rise in GM's share price -- provided Mr. Kerkorian is in the black on his investment.  At the moment, however, he is deeply in the red. Since April 2005, Mr. Kerkorian has invested $1.7 billion in GM stock but his stake is currently valued at only about $1.2 billion. GM's stock has fallen 9% since Mr. York was named a GM director on Feb. 6. "GM has mixed feelings about Jerry," says David Cole, chairman of the nonprofit Center for Automotive Research in Ann Arbor, Mich. "He can be helpful and scary." A GM spokesman declined to comment about Messrs. Wagoner and York. For the car maker's directors, Mr. York brings automotive experience and a track record of turnarounds. "I'm thrilled he's come on the board," says Erskine Bowles, who was chief of staff under President Clinton. Adds John Bryan, retired chief of Sara Lee Corp., "He's very welcome." Mr. York hasn't pushed for a management shake-up, but he recently told analysts that "time is of the essence" and GM needs "a huge restructuring plan." A Memphis, Tenn., native and son of an Army colonel, Mr. York graduated from West Point but a gymnastics injury ended a possible military career. He received a master's degree at the Massachusetts Institute of Technology and arrived in Detroit in 1963 to take a job as a GM project engineer. While working toward an M.B.A. at night, he received several carburetor-design patents. But he wanted more. Mr. York quickly revealed his intention to "become the chairman and CEO," according to his first boss, Craig Marks. A restless workaholic, Mr. York switched into operations and then finance. He moved to Ford Motor Co. and eventually to Chrysler. In 1979, when Chrysler was on the verge of bankruptcy, he stayed up all night on coffee and cigarettes preparing a financial presentation. (He still smokes a pack a day.) Three minutes into his talk, he fainted. Medics carried him out on a stretcher. Mr. York left the auto industry in 1993 to become chief financial officer under Louis Gerstner at IBM. There he honed his reputation as a cost-cutter. Mr. York "let the numbers tell him what was wrong with the strategy," says Paul Sterne, who worked with him at GM and IBM. "He would rip people apart who didn't deliver." He drove himself hard. During a blizzard, Mr. York arrived early one morning with a snowplow attached to the front of his Dodge pickup truck. He devoured spicy Italian and Mexican food. Meanwhile, he urged IBM executives to treat corporate spending as their "family checkbook." By 1995, Mr. Kerkorian, the billionaire who controls resort and casino operator MGM Mirage, had lured Mr. York back to the auto industry. After buying 14% of Chrysler's shares, he hired Mr. York to push the auto maker into taking steps that would raise the share price. The next year, Mr. York threatened a proxy fight, which forced Chrysler to approve a stock-repurchase plan and raise its dividend. It merged with Daimler-Benz in 1998, and Mr. York received more than $50 million using a formula based on the stock's appreciation. For the next several years, Mr. York served as a director of companies that were running into trouble, including Waste Management Inc., Tyco International Ltd. and Apple Computer Inc. Ralph Whitworth, an investor activist who also served on the Waste Management board, says Mr. York sat in meetings with a yellow pad and ruler, and created his own spreadsheets. "Then he hands out his version of the company's financials on the spot," recalls Mr. Whitworth. Mr. York moved back to Detroit two years ago to be near relatives. A few months later, GM's fortunes turned sharply downward. The company's U.S. market share fell to a record low of 25% and employee-benefit costs were taking a greater toll. The share price fell steadily. Mr. York told analysts recently that as he saw GM's plight, he thought about giving Mr. Kerkorian a call. Kicking the Tires Mr. Kerkorian beat him to the punch. He phoned Mr. York in March 2005 and asked him if he had seen what was going on with GM. The two men quickly agreed that Mr. York would take a "deep dive" into GM. He scoured public sources of information, visited 20 GM dealerships to test-drive vehicles and quizzed former car-company colleagues. A month later, Mr. York sent Mr. Kerkorian a 14-page report. It concluded that GM had "plenty of cash to fix itself." But as Mr. York recounted in his speech to analysts, the report said a big question remained: Could GM take a "clean-sheet-of-paper approach to the business" and "make the tough decisions"?  Within days, Mr. Kerkorian, making a big bet that the stock was undervalued, began buying GM shares through Tracinda Corp., an investment company he owns. Tracinda disclosed the purchase in May, saying it was for "investment purposes" only. Still, Mr. Kerkorian retained Mr. York to push for an aggressive overhaul of the company. Mr. Kerkorian agreed to pay Mr. York 4% of any of his GM stock gains, to be measured in 2009 if Mr. Kerkorian still holds his GM stake then or earlier if he sells it. Mr. York also receives an annual fee of $600,000 and $4,200 an hour for expenses when he travels in his personal Gulfstream jet, according to a Tracinda regulatory filing. Soon Mr. York asked for a seat on GM's board. GM resisted, asking that Mr. Kerkorian agree to a "standstill" agreement under which he wouldn't buy or sell additional GM shares. On Jan. 10, Mr. York went public. At a luncheon speech in Detroit to auto analysts, he accused GM's executives of lacking "urgency." He reeled off drastic proposals such as slashing the dividend and selling off GM's Hummer and Saab brands to raise cash. "The time has come to go into crisis mode and act accordingly," he said. Shortly afterward, Mr. Kerkorian made a counterproposal over the board seat, telling GM that Mr. York wouldn't provide him with any confidential information learned as a director. At the next meeting of the GM board, on Feb. 6, the directors cut the dividend to $1 a share a year from $2 and named Mr. York to the board. There was an early hitch: Mr. York drove a Jeep, a Daimler-Chrysler brand. He switched to a Chevrolet Equinox. Diving In Mr. York wasted no time getting a grip on GM's issues, which include downgrades by credit-rating agencies and the threat of a crippling strike at auto-parts supplier Delphi Corp. In mid-February, he emailed GM's new chief financial officer, Frederick "Fritz" Henderson, saying he had "reformatted the balance sheet" based on his own analysis of GM's publicly disclosed figures. Mr. York asked Mr. Henderson to provide numbers on his sheet that were highlighted in yellow and verify numbers highlighted in plum. Mr. Henderson says he was happy to do so. "I learn as much from him as he does from me," says Mr. Henderson of his email exchanges and recent meetings with Mr. York. Then Mr. York met with Robert Lutz, GM's design leader, with whom he had worked at Chrysler. Mr. Lutz has said he disagrees with Mr. York's proposal to sell the Saab and Hummer lines. At the Geneva auto show a few weeks ago, Mr. Lutz told attendees that Mr. York no longer wanted to dump Saab. Mr. York promptly fired off an email that he hadn't changed his mind, people familiar with the matter say. By his first board meeting on March 6, Mr. York was prepared. "He's crammed in three weeks what most of us learned in a year," one GM director says. As Mr. Wagoner made his points, Mr. York demanded: "What's the cash effect?" according to attendees. Soon Mr. York's line became a chorus, with several other directors chiming in. Then Mr. York criticized GM's auto-sales report for lumping sales to consumers together with fleet sales to companies. "I want to see how we're moving the metal," attendees say Mr. York told Mr. Wagoner. Some directors, aware of Mr. York's reputation for bluntness, say he was collegial as he asked penetrating questions. Mr. Bryan says he was "very polite." Once Mr. Wagoner left the room so the board could meet in executive session, Mr. York worked with GM's lead outside director, George Fisher, retired chief executive of Eastman Kodak Co., to draft new marching orders for the GM chief executive. The directors decided to ask for a plan outlining how much cash would be added or burned over the next three years and a product lineup designed to hold GM's 25% North American market share, with contingency plans if the figure falls as low as 21%, people familiar with the matter say. Several weeks ago, Mr. York asked for a meeting with human resources. One topic: He wanted to know how executives' performance was evaluated. The list of those not making the grade could grow if Mr. York, known for being decisive against underperformers, continues to gain influence. One big question is whether he will push for heads to roll from the very top and fulfill the dream he expressed long ago of being GM's chairman and CEO. "Jerry is a strategic and analytical thinker who could be the chairman to pull GM out of this crisis," says Thomas Stallkamp, a former Chrysler president who worked with Mr. York for years. "But he's not the right guy to be the CEO," Mr. Stallkamp contends. "GM's leader needs to be larger than life and reaching out to the workers and unions," he says. "Jerry isn't a touchy-feely kind of guy." Write to Monica Langley at monica.langley@wsj.com | ||
Renf Member Username: Renf Post Number: 39 Registered: 11-2003 Posted From: 68.43.197.95 |
The Wall Street Journal reports that Mr. YOrk is building a new home in metropolitan Detroit. Does anyone know where his new home will be located? Thank you. | ||
Jerome81 Member Username: Jerome81 Post Number: 942 Registered: 11-2003 Posted From: 64.142.86.133 |
I highly doubt it. I'm not sure York knows anything more about the car biz than Wagonner. That means a lot. Sure you can move around when you make toothpaste or other consumer goods. Autos are a bit more than just a commodity. There is an emotional pull with cars. You have to have cars in your blood to be good. Any old executive off the street cannot successfully run a car company. Putting York in there wouldn't do squat. | ||
Jiminnm Member Username: Jiminnm Post Number: 354 Registered: 02-2005 Posted From: 68.35.85.184 |
This from York's GM official bio: "In his past business career, York spent 30 years in the automotive industry, having worked at General Motors, Ford and Chrysler. He spent 14 years at Chrysler Corp. in a variety of executive positions and served as executive vice president and chief financial officer of Chrysler from 1990 to 1993 and as a director from 1992 to 1993. York currently serves as a director of Tyco International Ltd., Apple Computer, Inc. and Exide Technologies, Inc. He has been chief executive officer of Harwinton Capital Corp., a private investment company that he controls, since 2003. From 1993 to 1995 he was senior vice president and chief financial officer of IBM Corp. and served as a member of IBM's Board of Directors in 1995. From 1995 to 1999, he was vice chairman of Tracinda Corp. York was chairman and chief executive officer of Micro Warehouse, Inc., a reseller of computer hardware, software and peripheral products from 2000 until 2003. He also served as a director of MGM MIRAGE from 1995 to 2005." It doesn't mean he knows more about the car biz than Wagoner, but he's had important jobs in key areas of the car biz there and, at Chrysler and IBM, he demonstrated the skills necessary to help bring a failing company around. That is a special talent applicable to almost any company. On the other hand, Bob Lutz (who really has the fire in his belly about cars and is charge of GM global product development) has had what I consider to be only a small positive impact on GM products. I expect the problems really lie with the Board, ineffective but entrenched senior management, and the culture and policies within GM. I don't think there will be substantial improvement until there is a serious shake-up of people and practices the company. They appear to think that they have made dramatic improvements and solved many of their problems with the recent salary and benefits changes, but compared to what other companies have had to do to turn around - they haven't even started yet. | ||
_sj_ Member Username: _sj_ Post Number: 1276 Registered: 12-2003 Posted From: 69.220.230.150 |
Lutz was the best thing at Chysler and GM. York maybe the first guy to have the guts to say what needs to be said. However this grandstanding still does not take care of legacy costs or skyrocketing employee costs. |
