MGM has named Mary Parent chair of its Worldwide Motion Picture Group to spearhead the studio’s evolution from a distribution-driven company to a studio that will generate its own pics.

Parent will oversee the Lion’s worldwide theatrical production, distribution, marketing and business affairs and report directly to chairman-CEO Harry Sloan and the board of directors.

Her appointment, however, opens the question of what will happen with Rick Sands, who as chief operating officer had taken a lead role on the film production end, along with his other duties.

The former vice chair of worldwide production at Universal, Parent stepped out of that job two years ago along with Scott Stuber to form Stuber/Parent, a shingle that kicked off with one of the richest first-dollar-gross producer pacts in Hollywood.

Parent and Stuber made eight features, accumulated about 70 projects and were just moving into new offices in a spacious bungalow on the U lot when Sloan convinced Parent that rebuilding MGM’s production biz is a better career option.

“To be blunt, this was an opportunity that wasn’t ever going to exist again,” Parent said. “All the hard work Scott and I did was just starting to pay off, and I don’t think I will ever see a deal like that again, but I can always go and make movies. This was one of those moments in time where it just felt clear to me that this was worth the jump.”

“This was an opportunity for Mary to do something unique and I’m proud of her for doing it,” Stuber said. “It’s a studio that people have questions about, until they bring in someone who successfully ran a studio, who knows talent, how to speak their language, and who knows how make a movie and market it. I think it will be great for Mary, MGM, and it’s good for the town to have another place that is actively looking to make movies.”

Sloan, who along with Sands has been slowly overhauling MGM, placed a premium on finding a top executive to entice talent to make films at the studio. While the lobby in front of Sloan’s office in MGM’s Century City HQ is filled with replicas of dozens of Oscars from MGM’s heyday, it has been a long time since MGM was considered a prestigious place to make features.

Parent’s mandate is to help change that perception. She brings strong talent relationships from her years as an exec at Universal and New Line. Parent, who said she will be able to greenlight films in concert with Sloan, will hire an executive staff and begin buying material immediately, anticipating that she will generate her first homegrown slate in 2010.

“The decision to bring Mary over shows that Harry Sloan and the investors are deadly serious about taking MGM to the next level,” said Key Creatives principal Ken Kamins, who as manager of Peter Jackson worked with Parent both on “King Kong” and “Halo,” the latter a movie adaptation of the Microsoft game that Parent was going to produce with Jackson before U and Fox backed out. “This move gives them a whole other kind of credibility. Mary’s creative instincts and talent relationships are well documented, and no one in town is going to outwork her. No one. This is a huge get for MGM.”

One top lit agent was stunned by Parent’s decision to take the job but was already mulling her impact on the studio.

“I’m still dubious about MGM, but now I would put a really good client in there because Mary is good at what she does,” the dealmaker said. “Still, at the end of the day, Harry has to prove that he’s going to spend the money to develop movies and that he’s got the ability to turn them into hits on the distribution end.”

Parent said she’s been impressed by Sloan’s accomplishments to date.

“There have been other iterations and false starts here, but when I looked at Harry and what he has quietly accomplished over the past two years, he has created an incredibly strong foundation to build on,” Parent said. “He has created an entity that is ready to grow.”

Still, many in the biz have questions about MGM’s long-term viability.

MGM’s strategy of serving as a distribution system for films financed by Sidney Kimmel’s SKE, Ryan Kavanaugh’s Relativity, Tom Rosenberg and Gary Lucchesi’s Lakeshore Entertainment and Harvey and Bob Weinstein’s Weinstein Co. has yielded subpar results, but insiders argue that it has allowed Sloan to keep the company’s distribution operation active and earning some coin during the overhaul.

To that end, Sloan accumulated several franchises that could anchor his studio for years to come. They include James Bond and the Pink Panther; pics in those series are currently co-financed and distributed by Sony Pictures Entertainment but will return to MGM following the films currently in production.

Sloan was also the catalyst for fast-tracking two installments of “The Hobbit,” repairing a rift between Peter Jackson and New Line. Guillermo Del Toro is currently in talks to direct the two pics. The studio has also put into development a sequel to “The Thomas Crown Affair”; remakes of titles that include “Death Wish,” “Robocop” and “Fame”; and an adaptation TV sci-fi anthology “The Outer Limits.”

Sloan brought in Tom Cruise and Paula Wagner to revive United Artists, backed by a $500 million production facility from Merrill Lynch. The studio’s first release, “Lions for Lambs,” was a high-profile failure that has placed added pressure on the next Cruise-driven effort, the Bryan Singer-directed “Valkyrie.”

UA has made it a priority to find a commercially viable franchise for Cruise, and one distinct possibility is “Champions,” an adaptation of the ’60s British TV adventure series. That project was acquired with Del Toro attached, but he would likely be replaced since he will spend the next four years in New Zealand on Hobbit duty.

According to MGM, the studio has the funds for an aggressive production push. That includes the $500 million in UA’s Merrill Lynch money that could be accessed as MGM and UA partner on films like “Thomas Crown Affair 2” “Outer Limits” and “Robocop.” On its own, MGM has a $450 million credit facility with JPMorgan that it hasn’t yet tapped.

MGM relied on its shareholders to finance half the budget of the $230 million Bond film “Quantum of Solace” as well as the $60 million “Pink Panther 2,” but it will need considerably more funding to pay for the kind of slate Parent has been brought on to generate. The studio is exploring the possibility of reviving a campaign to find coin for the MGM Film Franchise Fund, an effort it pulled back on last year when the market went soft.