Nardelli: Back in the Game at Chrysler

Home Depot's widely criticized former CEO goes into private equity as he takes over a huge turnaround at the troubled automaker

by David Kiley and David Welch

Former Home Depot chief executive Robert Nardelli is the new chief executive of Chrysler Corp., marking the second time in less than a year that one of Detroit's struggling Big Three automakers has reached outside the automotive ranks to try and save one of America's industrial corporate icons. Ford named former Boeing (BA) executive Alan Mulally its CEO last September.

Nardelli was moved into the top position by Cerberus Capital Management, which last week closed a deal to take ownership of 80% of Chrysler from DaimlerChrysler (DCX). Nardelli, 59, replaces current CEO Thomas LaSorda who will become president and vice-chairman of the automaker.

Nardelli's move into the executive suite at Chrysler comes as a surprise. Just last week, Cerberus Chairman John Snow said Chrysler management would stay intact. But former Chrysler Chief Operating Officer Wolfgang Bernhard, who had worked with Cerberus on the acquisition and was expected to be named chairman, suddenly left Cerberus in the last few days for "family reasons," according to Chrysler spokesman Jason Vines.

A CEO with a Reputation

Nardelli, a former General Electric (GE) highflier who lost the contest to succeed Jack Welch as CEO of GE to Jeffrey Immelt, could be a jolt to Chrysler's culture. A hard-driving executive with a reputation for generating more fear than respect among the ranks, Nardelli left Home Depot (HD) last January under a cloud after the home-improvement chain's stock languished, customer service plummeted, and the CEO was tagged by angry investors as arrogant toward shareholders.

Nardelli also became a poster boy for skyrocketing CEO pay not tied to stock performance. To make his image on that score worse, Home Depot and the CEO negotiated a $210 million "retirement package" (see BusinessWeek.com, 1/4/07, "Out at Home Depot").

Besides Nardelli's appointment, Cerberus has a handful of former Chrysler executives with key advisory roles in the automaker's turnaround strategy. Retired design chief Tom Gale is advising on new product development. Former Chrysler sales and marketing boss Gary Dilts, who quit the company last year in a dispute over sales strategy, now has a role in developing the company's retail strategy. And Thomas Gilman, a past executive with Chrysler Financial Services, is helping Cerberus carve out its auto lending business from Daimler. Those advisers will have a key role in Chrysler's planning and business strategy, but so far none have taken key executive jobs. In a move that was expected, Chrysler Chief Operating Officer Eric Ridenour is leaving the company, and the position will not be filled. Ridenour couldn't be reached.

Recovering from Mismanagement

Cerberus has also set some aggressive new business goals for Chrysler. One is to cut sales to rental car fleets—typically a thinly profitable or even money-losing business—by as much as 200,000 vehicles a year. Cerberus believes that cutting rental sales will trim the supply of low-mileage used Chrysler vehicles on the market and help the company get better prices for its new cars.