Chrysler's New 'Tough-as-Nails' CEO

By installing the controversial Bob Nardelli, Cerberus will shake up Chrysler—but that is just what the carmaker needs

by David Kiley

If Cerberus Capital Management, the new majority owner of Chrysler, wanted to make a bold statement Monday on its first day of running the automaker, the private equity firm succeeded when it named the well-known and controversial Robert Nardelli as its new chief executive.

Nardelli, a former top General Electric (GE) manager who lost out to Jeffrey Immelt in the contest to succeed the legendary Jack Welch back in 2000, tends to elicit strong opinions and reactions wherever he goes. At Home Depot (HD), where Nardelli went after GE, he alienated the retailer's founders, Wall Street, shareholders, and virtually all of the management he inherited. He would go on to become a symbol of excessive CEO pay—as well as CEO arrogance because he wanted nothing to do with shareholder meetings.

At the now privately held Chrysler, Nardelli's brand of management science and military leadership style may be just what Chrysler, long criticized for an undisciplined operating culture, needs to return to a profitable track. On the other hand, his lack of experience in the car business and his manage-through-fear track record could become so disruptive to Chrysler that Cerberus could end up getting its investment in the automaker back by selling off the Jeep brand instead of managing the whole company back to profitability.

"Not a Car Guy"

One of Nardelli's former colleagues says he is a fan of the new Chrysler CEO despite not recommending him for the CEO spot at General Electric. "Bob will tackle this with a vengeance," says GE former Chairman and CEO Jack Welch in an exclusive interview with BusinessWeek. "He will work seven days a week. He will have people on his team who are that committed." (To read more of Welch's comments about his former protégé, see BusinessWeek.com, 8/6/07, "Jack Welch: 'Cerberus Hit a Home Run'").

A longtime Chrysler watcher, professor Gerald Meyers of the University of Michigan, has a different take on Nardelli's chances for success in the auto industry. "Cerberus has the right idea, but the wrong guy," says Meyers. The onetime chairman of American Motors, Meyers says that Nardelli is "not a car guy…he could take 18 months to get his wheels out of the sand in terms of learning what he needs to know…and Chrysler doesn't have a lot of time."

Meyers predicts that one of the aspects of the car business Nardelli will find most frustrating is that, unlike Home Depot store managers, dealers do not work for Chrysler. "They can be an ornery bunch, especially when things aren't going well, and the state laws are written to protect them against the car companies trying to bully them," says Meyers.

Union Negotiations

The new CEO is also walking into Chrysler just as it is negotiating new contracts with the United Auto Workers and the Canadian Auto Workers. These talks for new contracts are said by analysts to be critical to the future of Chrysler, Ford Motor (F), and General Motors (GM). CAW President Buzz Hargrove told Reuters (RTRSY) Monday that he was "surprised and concerned" by Cerberus' decision to hire Nardelli. "We don't know the guy."

Just last week, Cerberus Chairman John Snow, the former Treasury Secretary under President George W. Bush, said there would be no management shakeup coming at Chrysler, although with outgoing CEO Thomas LaSorda being demoted to president and vice-chairman, that is clearly not the case.