Nardelli as New Chrysler CEO and What it Means for Chrysler's IT
11/08/2007
In January of 2007, as Home Depot shareholders seethed, Bob Nardelli took a $210 million exit package and resigned as CEO. This week, he landed the CEO job at Chrysler.

Aug 9, 2007 Written by: Kim S. Nash in News

The troubled carmaker is newly private -- investment firm Cerberus announced in May it would buy Chrysler -- so Nardelli doesn't have to contend with angry (public) shareholders anymore.

But some of his less savory career milestones are being scrutinized this week. He came up through GE’s fabled management ranks, only to get passed over for the top slot when Jack Welch retired in 2001.

Reading the writing on the wall, he left GE in 2000, before Welch did, and hopped over to lead Home Depot, only to see its stock drop to $39.70 per share when he left -- down 10% from the $44.22 it traded at when he started.

Whatever Nardelli does and doesn’t accomplish at Chrysler, he’ll be one of the most watched CEOs alive. Rightly so. He’s got a reputation as a chief who knows I.T., having pushed Home Depot’s controversial move into self-checkout technology and hired Bob DeRodes as Home Depot CIO to impose order -- namely, metrics -- on the technology team there.

Information technology may or may not help Chrysler now. The company’s problems mainly stem from pension demand from retirees, health care costs and expensive unionized labor, according to CNNMoney.

Meanwhile, Toyota earlier this year became the biggest car company on the planet, in terms of sales, in part thanks to smart, effective application of information technology. Barbra Cooper, CIO of Toyota, will be inducted into our Hall of Fame in October.

I’m wondering how long Sue Unger, longtime CIO of Chrysler, will work under Nardelli. Unger has created Chrysler’s "digital factory" for building virtual assembly lines and testing new-car design ideas. She’s also known for innovation in both I.T. and finance, winning the Automotive Hall of Fame’s Distinguished Service Citation last year.

Alex Taylor, who has covered the car industry for years for Fortune magazine, thinks Nardelli is the wrong guy for the job, on Monday writing that Nardelli:

"…arrives on the heels of an enormous fiasco at Home Depot, appears to have a very high psychic profile, and by all accounts has the tact of a Marine drill instructor. This is not precisely what Chrysler needs at this point..."

Taylor says Chrysler would do better to find a leader without Nardelli’s "hard-charging" and "aggressive" style.

On Chrysler's corporate blog,

VP of communications, Jason Vines, defended Nardelli:

"A fresh set of eyes from outside the industry can find new and better ways of doing things. Our owners at Cerberus think Bob’s incredible track record in successfully running the many businesses he did, at General Electric and on the retail side of Home Depot, can speed up the recovery of The New Chrysler. Everyone’s future at Chrysler—our employees, our dealers, our retirees, our supplier partners—rests on a sustainable recovery. We know that."

Well, we know it, too, and we'll be watching.

UPDATE: Unger won’t work under Nardelli at all, opting instead to remain on the Daimler side, as senior vice president and CIO for the German company, a spokeswoman for Unger says. Jan Bertsch, who reported to Unger and ran Chrysler’s IT group, specifically, before Cerberus’ buyout of Chrysler, will now become The New Chrysler’s CIO.

The New York Times




August 7, 2007

Once Tainted, Nardelli Now Has Chrysler’s Keys

AUBURN HILLS, Mich., Aug. 6 — When Robert L. Nardelli was sent packing from Home Depot in January with a $210 million exit package and a reputation as an imperious chief executive who had made strategic blunders, he seemed tarnished forever.

But that’s not the way some big investors see him. To them, he is a former operations whiz at General Electric who can bring new managerial discipline to Chrysler, and make the struggling Detroit automaker hum again.

And so, in being named chief executive Monday at Chrysler by its new owners — the private equity firm Cerberus Capital Management — Mr. Nardelli, 59, is being given the chance to try to bring off two comebacks: Chrysler’s, and his own.

“It’s an amazing redemption,” said Michael Useem, professor of management at the Wharton School of the University of Pennsylvania.

His challenges are enormous. Chrysler is in the midst of its fourth turnaround effort in three decades. And Mr. Nardelli is an outsider entering a complicated industry at a time when Japanese companies like Toyota and Honda are surging.

But his managerial style will be less of an issue at Chrysler than at Home Depot. With Chrysler now a private company, he will not have to answer to individual shareholders, whom he angered at a 2006 annual meeting by refusing to answer any questions and by strictly limiting their time to speak, using two large digital timers.

And many of Mr. Nardelli’s new bosses already know him well, since several executives at the private equity firm once worked at G.E.

If he succeeds, Mr. Nardelli may be this century’s version of Lee A. Iacocca, who took charge at Chrysler after an embarrassing demotion at Ford Motor by Henry Ford II, and effectively turned around the company with a hard-charging style (and some help from Congress.)

Mr. Iacocca, in fact, praised the hiring of another outsider, Ford’s Alan R. Mulally, in his latest book. Commending Ford’s chairman, William Clay Ford Jr., for the move last year, Mr. Iacocca wrote, “Sometimes an outsider’s perspective can re-energize a tired business plan.” (Mr. Iacocca could not be reached for comment on Chrysler’s news).

If Mr. Nardelli succeeds, he may earn himself another fortune. Although the details of his compensation will not be made public, he will be paid handsomely if Chrysler, whose separation from DaimlerChrysler occurred Friday, can reverse its losses. If it doesn’t, he will earn very little, according to people familiar with his contract.

His task, he said at a news conference here Monday, is to prove that manufacturing, and the automobile industry, “is part of America’s future, not its past.”

At the outset, at least, Mr. Nardelli said he planned no big changes to Chrysler’s latest turnaround program.

“They got it,” he said of Chrysler management, which plans to cut 13,000 jobs. “If we can do it faster, if we can do it more efficiently, that’s what we want to do.”

Mr. Nardelli acknowledged that he did not have automotive expertise, but noted his experience in dealing with industrial issues at G.E., where he had risen to run a division making power systems such as generators and turbines before leaving to join Home Depot in 2000.

“While I’m new to Chrysler, and new to the car industry, manufacturing and transportation is a business I know, I like and I grew up in,” said Mr. Nardelli.

Many workers at Chrysler, where the DaimlerChrysler signs have already been taken down and the traditional five-pointed star logo has been restored, seemed to reserve judgment about their new boss.

Jim Samuel, an employee since 1971, said he has some of the same worries now that he remembers having when Mr. Iaccoca came to Chrysler from Ford. “You had that eerie feeling about a newcomer,” Mr. Samuel said.

David E. Davis, a veteran automotive journalist and founder of the Winding Road, a Web-based car magazine, said he feared for Chrysler under Mr. Nardelli, whom he predicted would bring “slash and burn cost-cutting” to Auburn Hills.

“You hate to see what this creature is going to look like when they finally get through dismembering it and putting it back together,” Mr. Davis said.

Though Mr. Nardelli won’t have stockholders to worry about, he will have to win the support of dealers, parts suppliers and the United Automobile Workers union, with which Chrysler and the other Detroit companies just opened talks on a critical new contract.

On Monday, Mr. Nardelli said he would leave responsibility for the talks to Thomas W. LaSorda, the son and grandson of Canadian labor leaders, who was Chrysler’s chief executive until Mr. Nardelli’s appointment, and will now be vice chairman and president.

Mr. Nardelli has already reached out, literally, to the union’s president, Ron Gettelfinger.

The pair met for several hours before Mr. Nardelli’s appointment was announced, with Mr. Nardelli declaring him to be “a wonderful individual, very engaging.” Later on, Mr. Nardelli stood next to Mr. Gettelfinger before Chrysler employees, an arm slung casually around his shoulders, a rare gesture for a Detroit chief executive.

Mr. Gettelfinger told workers that the U.A.W. realizes “that our future is tied to the future of the new Chrysler.” He added: “Welcome home, Chrysler.”

Noel Tichy, a University of Michigan professor and expert on G.E., who has known Mr. Nardelli since 1985, called him “an incredible selection.” Mr. Nardelli, he said, would “take a hard look at bureaucracy and redundancy.”

And David M. Fernelius, a dealer in Cheboygan, Mich., said he was optimistic about the company’s prospects.

“We have good products, world-class from Chrysler now, and we’re hoping this new management will give us some good marketing and get the word out to the public,” he said. “We can tout Chrysler as an American company now.”

But any honeymoon could be short unless Mr. Nardelli adopts a more agreeable management approach. Critics say his style at Home Depot was heavy-handed and unforgiving: he pelted employees with constant e-mail messages at all hours, focusing on problems as minor as poor lighting in a store.

He drew fire for diverting Home Depot’s attention from its basic home supply business in stores and creating a separate $12 billion wholesale division that failed to meet expectations and was sold soon after his ouster.

Further, Mr. Nardelli became accustomed to lavish catered lunches, in contrast to Chrysler, where Mr. LaSorda frequently picks up a cafeteria tray.

Mr. Nardelli, however, was hired not for his people skills but for his operational expertise, which helped Home Depot double its sales and the number of stores worldwide. At G.E., moreover, he was among three executives considered as successors for John F. Welch Jr., leaving when he failed to get the job.

Mr. Nardelli’s lack of automotive expertise will be his biggest hindrance, said Gerald Meyers, the former president of the American Motors Corporation and an expert on crisis management. “There’s nothing in his background that says he lives, breathes and loves cars,” Mr. Meyers said.

But Mr. Nardelli tried his best Monday to present himself as a car guy. He said he owns a PT Cruiser, a Plymouth Prowler and a Jeep, and said his love for the company dates back to high school, when his first car after graduation in 1966 was a Dodge Dart.

Mr. Nardelli said Monday that his wife, Susan, sent him an e-mail message upon learning he was being courted by Cerberus for the job. “It must have been fate,” he said she wrote him. “Our first date was in the Dodge Dart.”

Michael Barbaro reported from New York, Nick Bunkley from Auburn Hills and Mary M. Chapman from Detroit.