Chrysler Increases Dividend 25% Move Intended To Help Thwart Kerkorian’s Takeover Attempt

Chrysler Corp. raised its stock dividend 25 percent Thursday, taking another step to satisfy shareholders who might be restive because of billionaire Kirk Kerkorian’s proposal to buy the automaker.

But the increase, which takes the quarterly payment up 10 cents to 50 cents a share, didn’t carry much weight with Kerkorian, Chrysler’s largest stockholder.

“A quarterly dividend of a dime is a very small step in the right direction, but it does not even begin to address the fundamental issue of substantially increasing value for all Chrysler shareholders,” Alex Yemenidjian, an executive at Kerkorian’s Tracinda Corp., said in a statement.

Chrysler Chairman Robert J. Eaton focused on that issue - value for shareholders - at the company’s annual meeting Thursday in St. Louis. He said Chrysler leads the auto industry in stock performance this decade and has a higher profit margin and dividend yield than General Motors and Ford. But he said the stock price, which has languished despite a year of record profits, has been a disappointment.

“Everything seems backward and upside down,” he said, describing Wall Street’s logic in setting a value on auto company stocks.

Kerkorian has said he wants to maximize the value of his 36 million Chrysler shares by buying the 90 percent of the company he doesn’t already own. In December, he successfully pushed Chrysler to raise its dividend and announce a program to buy back $1 billion in stock on the open market, measures aimed at boosting the stock price.

His $55-a-share buyout proposal called for borrowing up to $13 billion and tapping $5.5 billion from Chrysler’s cash reserve, which is about $7.3 billion. Chrysler said the company isn’t for sale, and Kerkorian has been unable to assemble financing.

“That kind of buyout, even if it is doable - and we don’t think it is - would have saddled the company with an enormous debt burden,” Eaton told shareholders at Thursday’s meeting. If there were any Tracinda representatives among the 675 people there, they did not make their presence known.

At a news conference later Thursday, Eaton said Kerkorian “has been a very disruptive force in the company,” but he expected the Las Vegas investor to continue as a shareholder.