Jack Welch: 'Cerberus Hit a Home Run'

Both Welch and Home Depot co-founder Ken Langone believe Bob Nardelli can save Chrysler

by David Welch

Two of the biggest supporters of Cerberus Capital Management's decision to put Robert Nardelli in the top job at Chrysler just happen to have been his two most important bosses.

In an exclusive interview with Jack Welch, the former chief executive of General Electric (GE) tells BusinessWeek that "Cerberus hit a home run" by hiring Nardelli, who ran GE's Power Systems unit. "I don't know if the company is fixable, but if there is anyone who can fix it, Bob can."

Nardelli also has a champion in Kenneth Langone, Home Depot's billionaire co-founder and the man who handpicked him to run his company. Speaking at the Academy of Management's annual conference in Philadelphia, where he took part in a panel discussion about private equity on Aug. 6, Langone was as unequivocal as Welch: "If anyone can save Chrysler, Nardelli can."

High Praise

Welch says that Nardelli is without question one of the best executives he ever had. He thinks Nardelli got a bum rap at Home Depot (HD), and he believes that he can make troubled Chrysler hum again. He points to Nardelli's success with GE. When he ran GE's locomotive business in the early 1990s, the operation was a perennial also-ran to General Motors' (GM) locomotive unit. "We were on our back and always lost to GM," Welch says.

The answer was better product and fuel efficiency. Nardelli pushed GE to develop the cleanest and most efficient locomotive engines on the market. "He took us from 35% market share to 70%," Welch says.

After that, Welch put him in charge of the company's gas turbine engine business. It, too, was a laggard, Welch says. The company was a money loser and needed to get its technology in step with the demands of customers.

Nardelli slashed costs and used the savings to invest in new products, Welch says. Just like in the locomotive business, he led the development of a clean, efficient turbine engine. In six years, Nardelli took a money-loser and made $1.7 billion in operating profit in the final year on a company that brought in $10 billion in revenue.

"We cut costs and put the money into R&D," Welch says. "He had the right products at the right time and the market came to us."

Rocky Road to Chrysler

Perhaps he can do an encore at Chrysler. The company sells mostly big pickups, sport-utility vehicles, and minivans in a market that is trying to cope with $3-a-gallon gasoline. Chrysler badly needs to get in touch with consumers who keep migrating to smaller, more efficient foreign passenger cars and SUVs.

Despite his success, however, Welch passed over Nardelli and Boeing's (BA) James McNerney Jr. in favor of current GE Chairman Jeffrey Immelt. Welch won't say why. "I had three great guys," Welch says. "I couldn't go wrong with any one of them. These things aren't cut-and-dried. There's a gut feel involved."

While he didn't pass the baton to Nardelli, Welch still praises his accomplishments at GE and defends the hard-charging executive's rocky tenure at Home Depot.