WILMINGTON, Del. -- Gary Valade found various ways to protect and defend Chrysler during his 35 years there.
In federal court here on Tuesday, he did it again.
The former CFO -- now retired -- spent seven hours on the witness stand fencing with the attorney for billionaire investor Kirk Kerkorian in Kerkorian's billion-dollar lawsuit against DaimlerChrysler AG.
The retired executive brushed aside many of Kerkorian's allegations about the 1998 merger, and at one point provoked Kerkorian attorney Terry Christensen into commenting, "Maybe I should give up. You're doing a better job than me."
Kerkorian, who owned 89 million shares of Chrysler Corp. at the time of its 1998 merger with Daimler-Benz AG, is suing DaimlerChrysler and its senior German officials for more than $1 billion. Kerkorian has alleged that the merger was actually a takeover that was sold to the public as a friendly "merger of equals" to avoid paying another $6 billion to shareholders in buyout premiums.
Valade, who helped negotiate the deal, was unyielding in dismissing Kerkorian's legal argument and the semantics of takeovers-versus-mergers.
"We were looking a merger with a big premium," Valade told the attorney. "We had no concern with labels put on by others."
If Kerkorian's legal team was hoping for a sympathetic witness in Valade, it was disappointed. In the course of testifying over the past two days, the 61-year-old Valade told the court that he had devoted his entire career to Chrysler, that his father had done the same, and that his grandfather had done the same before that.
It was Valade, on becoming CFO in 1993, who pressed the automaker to begin setting aside a cash war chest for the first time in its history. The company had always been vulnerable during industry downturns, Valade explained. He made it his mission to make sure the company would be well cushioned for future downturns so that it could continue funding worker pensions and new product development.
At the time of the 1998 acquisition, Chrysler was sitting on $7.5 billion.
Valade testified that he had served the company through five different industry downturns, including the problems in the late 1970s that nearly resulted in bankruptcy.
During the most recent crisis in 2000, it was Valade, acting in his new role as executive vice president for worldwide procurement, who pressed suppliers to cut their part prices to help shore up the company's red ink-stained finances.
Valade had also been an early proponent for the merger, testifying Tuesday that he believed Chrysler needed a strong international partner to weather future downturns.
"I can't emphasize how vulnerable we were to a downturn," he said in court.
Still, early in the 1998 talks, Valade coached Chrysler management into holding out against Daimler-Benz's early offers. One of Daimler's first proposals reasoned that because Daimler's stock was selling for twice the value of Chrysler's, Chrysler should constitute just 33 percent of the merged organization's value.
"We made it clear from the get-go that that was not acceptable to us," Valade said
Daimler then offered to value Chrysler's stock at a 15 percent premium over its current price.
"Our reaction to that," he said, "was extremely cold. Chilly. We did not expect a valuation that low."
Ultimately, Daimler agreed to a 28 percent premium for Chrysler stock, which pegged it at $57.50 a share.
Kerkorian's suit asserts that if the deal had been correctly understood as a takeover, Daimler would have been forced to agree to a much higher premium for Chrysler stock - possibly 50 percent above market levels.
But Valade testified Tuesday that Chrysler's team already knew what Daimler's financial threshold was and that pushing for more than $60 a share would have killed the talks.
Valade's testimony in the trial here in U.S. District Court sparked new excitement on Kerkorian's side in December. In what was to have been the final hours of the trial, 61 pages of personal notes taken by Valade during the merger talks turned up as overlooked evidence.
Kerkorian's legal team believed the notes contained a treasure trove of revealing references to Daimler's true takeover intentions. Found among the pages were comments that seemed to support Kerkorian's suspicions that U.S. managers saw the takeover for what it really was.
"Structurally 'almost' a takeover," one Valade jotting said.
Another describes Chrysler Chairman Robert Eaton as "deeply troubled about structure."
Poses another: "Senior mgt sold out."
On the witness stand, as Christensen quizzed him on page after page of the notes, Valade offered more innocent readings. In many cases where managers were expressing concern, he said, it was concern for making sure the deal moved ahead. In other cases, the Chrysler team was trying to anticipate questions from shareholders and employees, once the merger went public.
Valade said he could vividly recall writing some of the notes. On other notes, he told a frustrated Christensen, he was just blank.
"And there's nothing I can say or do to help your recollection?" Christensen asked.
"Well," Valade responded, "you haven't."