GM's Game of Bumpercars

Even before Jerry York elbowed his way onto General Motors' board last month, he was stirring things up inside the sputtering automaker. In a speech during the Detroit Auto Show in January, the veteran turnaround artist recommended a radical repair job for GM that included dumping its Saab and Hummer divisions. "Saab and Hummer," York said, "will not save GM." The old guard immediately declined to follow York's advice, and last month GM vice chairman Bob Lutz told the media that York had undergone a conversion since becoming a GM director and now backed Saab and Hummer (despite the fact that Saab's a money-loser and Hummer sells in relatively small numbers). York responded with an e-mail to Lutz saying he still wasn't sold on Saab and Hummer, and chided him for putting words in his mouth. Lutz, one of Motown's biggest stars, went on a Detroit radio station the next day to eat crow. "Jerry would like me to say," a chagrined Lutz said, "that he's gone from negative on Saab and Hummer to neutral."

Just about every car buff in America has an opinion about what's wrong with Detroit and how to fix it. But York can't be ignored. He's the frontman and paid adviser to Vegas billionaire investor Kirk Kerkorian, who has amassed nearly 10 percent of GM's stock, worth $1.4 billion, making him the automaker's biggest individual shareholder. (He's also currently its biggest loser, with his risky bet nearly a half-billion in the hole.) Relentless and impatient, York is now at the center of GM's struggle for survival. And he's got his work cut out for him: last week GM revealed that its 2005 losses were $2 billion worse than it originally reported and now total a staggering $10.6 billion. This year is looking pretty grim, too: GM's share of the U.S. auto market has sunk to its lowest level since the roaring '20s.

York's fix-it plan: get real, make tough choices and get going (box). And he's already making a dent. In January, York urged GM's board and top brass to take a big pay cut and slash the stock dividend in half. A month later that's just what they did. To York, though, that's just the beginning. "The time has come," he said in January, "to go into crisis mode."

York, who declined to comment for this article, knows something about crisis management. The whip-smart West Point grad was the chief number-cruncher in the 1990s turnarounds of Chrysler and IBM. (Combined cost cuts: $10 billion.) He also rode shotgun as a paid adviser to Kerkorian, 88, during the investor's highly lucrative run at Chrysler a decade ago. Kerkorian once again turned to his old hand York, who is 67, last March, when GM's stock was in free fall. After hundreds of hours of research, York gave Kerkorian a green light to buy. But frustrated by GM's lumbering pace, Kerkorian pushed to get his man a seat on the table. Now York is the ultimate insider-outsider on GM's board.

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Since going behind the boardroom door, York's wasted little time. He's barnstorming factories, grilling execs, peering down the product pipeline and even getting into the nuts and bolts of GM's hybrid program. (And he is said to be pressing management to explain how they will fix the accounting errors that led GM last week to restate its earnings for the last five years.) York is out to overhaul GM, not just tinker around the edges. "A lot of people think GM's leadership is in denial," says United Rentals CFO Martin Welch, who worked with York at Chrysler. "Jerry will certainly bring them back to reality." In January, York called for a "clean sheet" approach, which means nuking slow sellers and entire car lines. "No sacred cows allowed," he said.

York has never been afraid to play rough. As Chrysler's flinty CFO, he hung a sign in his office that asked: what part of no don't you understand? He'd conduct mandatory Saturday-morning meetings to work over his finance staff, chain-smoking thin brown cigarettes as he demanded excruciating detail on every line of the balance sheet. If the staffers didn't deliver, they'd be back again Tuesday night at 7 or they'd be gone. "There was an element of threat and fear," says a former underling who asked not to be identified for fear of offending York. "He operated as if he was Iacocca Jr." When York was Lou Gerstner's hatchet man at IBM, execs were known to shake and sweat under his withering interrogation. And no one could keep up with his legendary work ethic. During Connecticut snowstorms, he'd hook a plow to the front of his pickup so that he could be at his desk by 8--and chide his charges for straggling in late.

In his rare off hours, the slight, bespectacled bean counter turns into a rugged outdoorsman. A hunter and gentleman farmer, he used to take fresh eggs to work at Chrysler, and his Christmas turkey is often his own kill. Friends say that he's building a new house on a 40-acre spread 50 miles north of Detroit. He'll tend crops, cattle and chickens. Though he stopped riding motorcycles in his 50s, he is an avid offroader. When he lived near Vegas, he tore the paint off a big Hummer (yep, the one he wants GM to dump) riding the rocks above his ranch.

Now, though, he's riding herd on Rick Wagoner. If the embattled CEO's turnaround fails to gain traction, speculation is rife in Detroit that York is in line for his job. But York has told insiders that he's not interested. So what's he really after? Some see York simply as Kerkorian's hired gun, out to make a killing. (He gets 4 percent of any gains Kerkorian makes, plus $50,000 a month.) Others, though, say York doesn't need the money and that he's really interested in finding a future for GM. Whatever is driving York--and it could be both--he is drawing a new road map for shareholder activism. Carl Icahn failed to break up Time Warner through outside rabble-rousing. But York could prove that going inside, while acting like an outsider, might be the best way to jump-start the machine that drove the American Century.

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