Picking Robert Nardelli to Save Chrysler Is The Most Bone-Headed Idea Of 2007.

Posted by: Bruce Nussbaum on August 6, 2007

The private equity guys at Cerberus Capital Managerment who bought Chrysler from Daimler think that Six Sigma can bring Chrysler back from the dead but they are dead wrong. Ex-GE, Six Sigma-believer Robert Nardelli practically ruined Home Depot in his stay there as CEO by putting the company through a Six-Sigma ringer, bringing in ex-military officers with a bent for hierarchy and replacing the company’s once-wonderful customer-focus with a wholesale mania that infuriated customers—and sent the stock down 8% during his tenure. Chrysler needs that?

The conventional wisdom is that Nardelli is the perfect “outside” guy to come in and straighten out Chrysler, just the way top Boeing exec Alan Mulally has been brought in to save Ford. Nardelli, described as “pugnacious” in the WSJ, will show the unions that they have to give up money and benefits and kick suppliers around too. That Chrysler has to downsize and rightsize to survive is, well, obvious. Any CEO will have to do that. But downsizing is only necessary, not sufficient.

Chrysler needs a top manager who is one with its customers—who knows their culture, their needs, their dreams. Nardelli isn’t that guy. He was successful at GE with their electric-power business. That’s a a b2b kind of business. Home Depot is a b2c kind of business but Nardelli ran away from retail. He felt comfortable only with b2b and built an entirely new wholesale operation that drained money and energy away from Home Depot’s core competency of listening to and understanding its retail customers. Hundreds, if not thousands of Home Depots wonderful store “helpers” left. In the end, the downturn in the housing market hurt the wholesale operation deeply and now, post-Nardelli, Home Depot is getting rid of it.

Private equity guys tend to like Six Sigma because it plays to their ideas of what makes for a successful turn-around—cutting costs, making business process more efficient, etc. They would do better to learn about innovation and design, especially when it comes to a car company.

Reader Comments

Steve

August 7, 2007 5:03 AM

Cerberus Capital Management just finished offChrysler with the hiring of Nardelli. What a mistake after his performance at HD. I have not encountered one HD employee who has anything positive to say about this stroke and his GE style of management that cost HD stock holders over 2B in capitalization. What a mistake, why doesn't this Jack Welch want a be stay at home and count his $240M he ripped of from HD stockholders. I give him and Chrysler 6 months.

Mike

August 7, 2007 1:42 PM

Have you ever encountered a person who fixes everything with just tool? Maybe all they have is a hammer, and they use it to fix all problems. Well, it sounds like Nardelli only has a GE tool, Six Sigma, to count on to solve all problems. That doesn't fix all problems as demonstrated at 3M and HD.

diego

August 8, 2007 2:59 PM

On a related note, be sure to check out David E. Davis's commentary over at the Winding Road blog: http://news.windingroad.com/earningsfinancials/david-e-on-chryslers-upside-down-logic-and-new-ceo/

Pete Mortensen

August 8, 2007 6:59 PM

Unlike Nardelli, you hit this on the head, Bruce. The reason Home Depot grew so tremendously before the arrival of Nardelli is that they were one with their customers. The empathy was palpable, and anyone who went in the store knew that the helpers genuinely wanted to see their projects succeed. That all went away when Six Sigma got put in place, and the company hasn't yet recovered.

The key here isn't necessarily innovation and design -- it's empathy. And it's hard to imagine what Bob Nardelli has in common with the kinds of folks that Chrysler needs to sell cars to. Anyone else take a $210 million severance package lately?

julio

August 11, 2007 5:47 PM

The problem with Six Sigma (SS) is that it does not focus on the customer. Customers pay the bills. When SS inevitably angers the billpayer, the bills go unpaid.

Toyota and Honda do not use Six Sigma. Toyota uses the Deming approach. Honda does not say, but I contacted Honda, they stated without hesitation that they do not use SS. I find it interesting to note that many SS consultants state without proof that the two great automakers do use this bone headed waste of time. If they used the real SS companies, they would not have jobs.

GE, now underperforming, 3M, the old Ford under Nasser, Gudiant, Home Depot, Citigroup, American Express and Motorola, with all their shortcomings, use SS to the detriment of their customers and ultimately their shareholders.

Go ahead Six Sigma consultants tell us what companies have done great using this sharholder rip-off scheme, know as 6 Sigma. All investors should steer clear of Six Sigma companies. I wonder when this failed Six Sigma scheme will blow over?

I will not buy a Chryser, Dodge or Jeep since Six Sigma will ruin the quality and boost the cost. Nor will I invest in Chrysler suppliers as 6 Simga will ruin their value. My next car is a Toyota/Lexus or Honda/Accura. My next stock, certainly not a six sigma company. So long Hemi Guys, been nice knowing you.

Julio

Dan Steele

September 1, 2007 12:26 AM

Retailer stock prices are based on same-store year to year comparisons and NOT overall profits. Once a retailer has matured, that Street measurement of it's value is just plain flawed. In Nardelli's case, he was handcuffed by that flawed measure of success. Nardelli's style may not be sexy, but the Home Depot recorded record profits under him. His performance was actually extraordinary. Let's not confuse stock price with profitability. Six Sigma is simply about efficiency. It's not something to be feared or demonized. He will not be handcuffed at Chrysler and I'm guessing they will appreciate the record profits coming their way. (And Bruce, you need to do your homework.)

Mike Viehweg

November 20, 2008 11:33 AM

Lee Iacoca took over Crysler for a dollar compensation for a year and stock options. If Nardelli tried that like Home Depot he would have to owe them 2 or three billion I guess you would call him a short CEO He goes in hoping the stock will dive.

carolyn jacobs

February 24, 2009 5:03 AM

Robert Nardelli might do better if he considered the consumer makes dodge an not the dealers he well protect I was part of the 38% of only bought dodge tell I WAS given nothing but the run around He just wants are tax money

webblog

May 10, 2011 6:07 AM

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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