Posted by: David Kiley on April 17, 2009
Chrysler CEO Robert Nardelli confirmed in a letter to employees today that he will likely be replaced as CEO of the automaker in the coming weeks as the company faces either an alliance with Italian automaker Fiat or a bankruptcy reorganization or liquidation. The company’s board, too, would be replaced, he said.
The admission from Nardelli, confirming a report in Businessweek.com on April 14, comes as the company is facing an April 30 deadline with the White House to cut a debt reduction deal with banks holding $6.9 billion of secured debt, as well as with labor unions to take lower wages and benefits.
Executives familiar with the negotiations say that banks so far have been uncooperative, and that the Canadian Auto Workers union has been reluctant to accept concessions being asked for. The United Auto Workers, representing U.S. workers, have postponed further talks with General Motors, which is facing a May 31 deadline with the White House, to focus on its Chrysler talks.
Fiat has a deal in principal struck with Chrysler and its majority owner, Cerberus Capital Management, to take a 20% stake in the automaker in exchange for sharing vehicle engineering and engine technology with Chrysler and agreeing to joint manufacturing and distribution of Fiat and Alfa Romeo vehicles. But that deal is contingent on the White House accepting Chrysler’s debt and labor restructuring plan and lending the company $6 billion of tax-payer money.
In Nardelli’s letter to employees, the former Home Depot CEO said a new board of directors will have the power to appoint a new CEO. “The majority of the directors will be independent (not employees of Chrysler or Fiat),” Mr. Nardelli wrote. He added that the board “will have the responsibility to appoint a chairman and select a CEO with Fiat’s concurrence.”
Executives close to Chrysler say that it is possible that Fiat CEO Sergio Marchionne will hold the title of CEO, similarly to the way Carlos Ghosn was CEO of both Renault and Nissan for a few years after he was granted the job at Renault. Renault has a controlling interest in Nissan, and had sent Ghosn to Nissan to turnaround the then-ailing Japanese automaker.
Nardelli was installed as Chrysler’s CEO by Cerberus after the private equity firm acquired 80.1% of the automaker in 2007 from Daimler-Benz. As part of the government bailout, Cerberus has agreed to zero-out its equity stake in the automaker, though it retains ownership of Chrysler Financial, the automaker’s loan-making arm.
Nardelli was somewhat of a surprising choice to run Chrysler. While Ford CEO Alan Mulally, who came to the automaker in 2006 from Boeing Co., had established what a qualified outsider could do at a hide-bound Detroit automaker, Nardelli’s reputation was bruised by a tumultuous tenure at Home Depot and an enormous exit package granted to him when he was ousted.
The possible role of two other key executives is not yet known. Vice chairman James Press left a long career at Toyota to become Chrysler’s fixer in 2007. Press has a exemplary reputation in the auto business. Vice chairman Tom Lasorda, who was CEO when Cerberus bought Chrysler, stayed on despite being replaced, and has been a key negotiator with Fiat to get the alliance deal forged.
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