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Can new CEO repair a sputtering Chrysler?
The early reviews of Chrysler's new-model CEO are in: Good acceleration and inexpensive, at least at first, but lacks fit and finish.
Some analysts see Chrysler Group's hiring of Bob Nardelli as chief executive as a smart move, bringing in an energetic executive who could contribute a much-needed outside perspective to the newly independent automaker. Others wonder whether Nardelli's lack of industry experience and infamously aggressive management style will make it hard for him to build consensus for the deep and painful changes that need to be made at Chrysler.
Either way, he certainly comes cheap. Assailed for his super-size compensation when he headed Home Depot Inc., where he averaged $25.7 million a year before walking away with a $210-million severance package, Nardelli won't be paid unless he turns Chrysler around.
And if he does? The company isn't saying. James Owers, a professor of finance at Georgia State University, said the no-payment-for-now pledge could engender "a certain skepticism, because this is now a private company and they have to tell nobody anything."
About all that was really clear Monday was that Chrysler's new owners had reached the same conclusion as the board of Ford Motor Co. when it hired a former aerospace executive as CEO last year: Detroit could use some outside assistance.
"The message here is that investors in both cases are saying, 'Cars are important, product is important, but money is important too,' " said Karl Brauer, editor in chief at online auto site Edmunds.com.
"They're saying, 'We need people with business skills to come in and straighten out the mess these companies have gotten themselves into.' "
At a news conference, Nardelli said he was committed to continuing the restructuring plan launched by his predecessor, Thomas LaSorda, which included cutting excess production capacity, improving product quality and expanding in emerging markets around the globe.
"It's not about creating a new strategy," Nardelli said. "They've got it. We're going to have laser-like focus on executing that strategy.
"What I bring is a fresh set of eyes, a new perspective if you will."
Although he has never worked in the auto industry, Nardelli said he had "spent most of my working life in transportation and manufacturing" and called them businesses "that I know, I like and I grew up in."
Nardelli, whose appointment was reported over the weekend, said he had met with United Auto Workers leaders to assure them that LaSorda, who is staying on as president and vice chairman, would remain in day-to-day control of negotiations on a new four-year contract.
For his part, LaSorda said he was on board with the decision by Chrysler's new owner, private equity firm Cerberus Capital Management, to put Nardelli in charge.
"I'm part of this team," LaSorda said. "Leave the egos at the door and let's go turn this company around."
Chrysler, which is based in Auburn Hills, Mich., and also builds the Dodge and Jeep lines, lost $618 million in 2006. All three U.S. automakers have been losing market share to Asian rivals as American buyers have turned away from the gas-hungry pickup trucks and sport utility vehicles that had been the bread and butter of the U.S. companies.
Chrysler's restructuring plan includes shedding 13,000 jobs in the U.S. and Canada by 2009.
Nardelli, 59, resigned from Home Depot in January. He was credited with doubling sales after taking over as CEO in 2000, but the stock price lagged during his last two years at the helm, while his pay soared. He was criticized for an "in-your-face" management style that often alienated employees and fellow executives.
Some of his strategic moves at Home Depot have been questioned. For instance, to cut costs, Home Depot "went from having knowledgeable employees in the store to less-expensive employees who might not know a hammer from a saw," said Georgia State's Owers.
Chrysler needs to forge joint ventures with other car companies to expand in overseas markets and to get a foothold in the growing market for hybrids and alternative-fuel vehicles, an industry observer said.
"Nardelli is hardly the poster boy for corporate diplomacy," Peter Morici, a business professor at the University of Maryland, wrote in an e-mail Monday.
Morici said Nardelli's scant automotive background would hinder him in addressing two other challenges facing Chrysler -- improving quality at all three of its nameplates and designing a new slate of vehicles that resonate with buyers.
People familiar with the thinking at Cerberus, which paid $7.4 billion for 80% of Chrysler, said the new owners were counting on pairing Nardelli's operational expertise with LaSorda's deep automotive background to guide Chrysler back to profitability.
On Monday, the company unveiled new multimedia-equipped versions of its Chrysler Town & Country and Dodge Grand Caravan minivans. Nardelli said they were examples of the company's goal, to have "the right product at the right price in the right place."