DETROIT -- Chrysler Corp. announced yesterday that it would increase its dividend, spend a billion dollars buying its own stock and weaken its anti-takeover plan, meeting almost all the demands of its largest investor, Kirk Kerkorian.
The actions by Chrysler's board surprised many Wall Street auto analysts and investors, who did not expect a buyback so soon or such a large jump in the quarterly dividend -- 60 percent, to $1.60 a year.
Mr. Kerkorian, who owns 32 million of Chrysler's shares, or about 9 percent of the total, was satisfied with the announcement, according to a spokesman.
Saying that he wanted to buy more Chrysler stock yet was disappointed with its lackluster price performance this year, Mr. Kerkorian threatened to sue Chrysler two weeks ago if it did not alter its anti-takeover rules, and to take other, unspecified action if it did not try to boost the stock price.
While Chrysler shares jumped more than $3 after Mr. Kerkorian's warning last month, they fell 75 cents yesterday, to $47.75, during heavy trading on the New York Stock Exchange. Speculators had bid up the stock in recent days in anticipation of an increase in the dividend after the board's monthly meeting yesterday.
In a prepared statement, Chrysler's chairman and chief executive, Robert J. Eaton, emphasized that most of the steps taken yesterday "have been under consideration by the board for some time."
But Chrysler acknowledged that the changes in its anti-takeover plan were made in response to Mr. Kerkorian.
Chrysler had been pursuing a conservative strategy to raise its share price. By building a cash cushion of at least $7.5 billion, Chrysler planned to weather the next slump in auto sales without dipping into its precious capital reserves.
Yesterday, Chrysler tried to allay fears that it was resorting to a quick fix, telling investors that they could have their cake and eat it, too. Chrysler announced that it would achieve its cash goal of $7.5 billion by the end of the year, while fully financing its pension plans for the first time since 1957.
In addition, it raised the amount that it plans to spend to develop new products during the next five years by 10.1 percent, to $22.9 billion, from $20.8 billion.
In a sign of confidence that Chrysler was not spending excessively on its stock, several credit rating agencies affirmed their opinions of the company yesterday.
"As far as the company has gone, we're comfortable with the rating and even with the possibility of an upgrade," said Scott Sprinzen, debt rating analyst with Standard & Poor's.
Chrysler said that, depending on market conditions, it would spend $1 billion to buy back its stock, beginning in the first quarter of 1995.