Nardelli to head Chrysler

Automaker and former head of Home Depot are both mounting comebacks

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August 07, 2007|By New York Times News Service

AUBURN HILLS, Mich. -- When Robert L. Nardelli was sent packing from Home Depot in January with a $210 million exit package and a reputation as an imperial chief executive who made strategic blunders, he seemed tarnished forever.

But that's not the way some big investors see him. To them, he is a former operations whiz at General Electric Co. who can bring new managerial discipline to Chrysler, and make the struggling Detroit automaker hum again.

And so, in being named chief executive yesterday at Chrysler LLC by its new owners - the private equity firm Cerberus Capital Management - Nardelli, 59, is being given the chance to try to bring off two comebacks: Chrysler's and his own.

"It's an amazing redemption," said Michael Useem, professor of management at the Wharton School at the University of Pennsylvania.

His challenges are enormous. Chrysler is in the midst of its fourth turnaround effort in three decades. And Nardelli is an outsider coming to a complicated industry at a time when Japanese companies like Toyota Motor Corp. and Honda Motor Co. are surging.

But his managerial style will be less of an issue at Chrysler than at Home Depot Inc. With Chrysler now a private company, he will not have to answer to individual shareholders, whom he famously angered at a 2006 annual meeting by refusing to answer any questions and by strictly limiting their time to speak with two large digital timers.

And many of Nardelli's new bosses already know him well, since several executives at the private equity firm once worked at GE.

If he succeeds, Nardelli may be this century's version of Lee A. Iacocca, who took charge at Chrysler after an embarrassing demotion at Ford Motor Co. by Henry Ford II, and effectively turned around the company with a hard-charging style (and some help from Congress).

Iacocca, in fact, praised the hiring of another outsider, Ford's Alan R. Mulally, in his latest book. Commending Ford's chairman, William Clay Ford Jr., for the move last year, Iacocca wrote, "Sometimes an outsider's perspective can re-energize a tired business plan." (Iacocca could not be reached for comment on Chrysler's news.)

If Nardelli succeeds, he may earn himself another fortune. Although the details of his compensation will not be made public, he will be paid handsomely if Chrysler, whose separation from DaimlerChrysler occurred Friday, can reverse its losses. If it doesn't, he will earn very little, according to people familiar with his contract.

At the outset, at least, Nardelli said he planned no big changes to Chrysler's latest turnaround program, only that he wanted to move more quickly and efficiently.

His task, he said at a news conference here yesterday, is to prove that manufacturing, and the automobile industry, "is part of America's future, not its past." He saw no reason to change the direction of the turnaround plan.

"They got it," he said of Chrysler management, which plans to cut 13,000 jobs. "If we can do it faster, if we can do it more efficiently, that's what we want to do."

Nardelli acknowledged that he did not have automotive expertise, but noted his experience dealing with industrial issues at GE, where he had risen to run a division making power systems such as generators and turbines before leaving to join Home Depot in 2000.

"While I'm new to Chrysler, and new to the car industry, manufacturing and transportation is a business I know, I like and I grew up in," Nardelli said.

Many workers at Chrysler, where the DaimlerChrysler AG signs have already been taken down and the traditional five-pointed star logo has been restored, seemed to reserve judgment about their new boss.

Jim Samuel, an employee since 1971, said he had some of the same worries now that he remembered having when Iacocca came to Chrysler from Ford. "You had that eerie feeling about a newcomer," Samuel said.

David E. Davis, a veteran automotive journalist and founder of the Winding Road, a Web car magazine, said he feared for Chrysler under Nardelli, whom he predicted would bring "slash and burn cost-cutting" to Auburn Hills.

"You hate to see what this creature is going to look like when they finally get through dismembering it and putting it back together," Davis said.

Though Nardelli won't have stockholders to worry about, he will have to win the support of dealers, parts suppliers and the United Auto Workers union, with which Chrysler and the other Detroit companies just opened talks on a critical new contract.

Nardelli has already reached out, literally, to the union's president, Ron Gettelfinger.

The pair met for several hours before Nardelli's appointment was announced, with the new CEO declaring him to be "a wonderful individual, very engaging." Later on, Nardelli stood next to Gettelfinger before Chrysler employees.

Gettelfinger told workers that the UAW realized "that our future is tied to the future of the new Chrysler." He added: "Welcome home, Chrysler."

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