Posted by: David Welch on August 6, 2007
I’ll go out on a limb and say that Robert Nardelli, the former General Electric and Home Depot exec tapped by Cerberus Capital Management to run troubled Chrysler, has a shot at fixing the company. No, he isn’t a savior. The problems he left at Home Depot after leaving in January prove that. He doesn’t have the marketing chops of famed Chrysler Chairman Lee Iococca. He doesn’t know how to make great cars. Nor will the public flap over his massive pay at Home Depot make him many friends among the union leaders he needs to win over to get billions in retiree benefits concessions. As my colleague David Kiley points out, he’s not known for being Mr. Nice guy to his subordinates, either. His bare knuckles style could send some talented people fleeing from Chrysler.
But knowing his reputation, Nardelli could also bring much-needed discipline to Chrysler. In addition to its retiree costs problems, which is a common malady in Detroit, Chrysler has simply blown too much money on incentives and flooded rental fleets with its cars in the name of making monthly sales targets and quarterly numbers for the old bosses at Daimler. At Chrysler, Nardelli can do what he did at GE’s locomotive and power generation businesses. He can cut away the fat, invest in new products and bring in some smart business sense.
Even after Chrysler owned up to its bloated inventories and announced a restructuring plan earlier this year, the smallest of the Big Three is still cutting rebate checks like they’re paid with Monpoly money. In July, Chrysler’s U.S. brands spent an average of $4,082 a vehicle on incentives. Only Mercedes spent more. The nearest domestic rival was General Motors, and even GM spent almost $1,000 a car less. Chrysler still pours cars into rental fleets.
The only way to change that is to cut back on spending and sell to those who want the car without being bribed into taking it. That could mean further cuts down the line. Nardelli said at the press conference today that the restructuring plan is dead on. That means no more cuts, right? Don’t buy it. Cerberus has said since the deal was struck in May that the investment firm has faith in Chrysler management. Then, three days after finalizing the deal Cerberus sent Chrysler COO Eric Ridenour packing, brought in Nardelli and made CEO Tom LaSorda his No. 2. La Sorda will be Vice Chairman and President. A lot of people may not like Nardelli’s medicine. And outsiders have notoriously flopped in Detroit. But Chrysler will need a martinet in the corner office if the company is to make it through its latest crisis. If Nardelli’s style doesn’t turn the place over, and if he doesn’t go too far with cost cuts, then his fiery brand of management might just work.