Chrysler Suicide Watch 20: Cerberus Bares Its Teeth

chrysler suicide watch 20 cerberus bares its teeth

When Daimler [s]gave[/s] sold Chrysler to Cerberus, it seemed as if things were looking up for the beleaguered automaker. With a return to American ownership, they no longer had internal factions gunning for each other. Cerberus spoke highly about Chrysler's leadership; they would take a "hands off" approach to running their automotive acquisition. They offered union leaders assurance: we're in it for the long run. No need to worry about "strip and flip." And then Cerberus announced that Robert Nardelli would take over the reins. Ladies and gentlemen, the three-headed dog is finally baring its teeth.

Mr. Nardelli has a reputation for getting results. Before the exec was asked to leave Home Depot's employ earlier this year, he doubled the company's sales. OK, Nardelli's tenure coincided with one of the biggest building booms in years, but he successfully expanded the franchise into Mexico and China and increased earnings 20 percent for four straight years. The fact that Home Depot's stock price fell eight percent during his reign is irrelevant to Chrysler; Cerberus is a privately owned firm that doesn't have to answer to stockholders.

While at Home Depot, Nardelli earned a fearsome reputation as an abrasive and ruthless cost-cutter. While profits soared, customer satisfaction and employee morale plummeted as he replaced experienced full time employees with cheaper part-timers. Nardelli also alienated store managers with his insistence on centralized command and control and micro-management. At the Depot's home office, "Boot'em Bob" replaced 98 percent of the top executives within the first five years.

Nardelli's forced departure from Home Depot was as controversial as his tenure. Of his $210m severance package, House Financial Services Committee Chairman Barney Frank said, "Mr. Nardelli's contribution to raising Home Depot's stock value consists of quitting and receiving hundreds of millions of dollars to do so."

So that's who's at the helm now: an ironfisted, hard-charging beancounter who has no qualms about dumping experienced employees to save a few bucks. He's a perfect fit with a company that emphasizes turning a profit as quickly as possible and doesn't mind tearing new acquisitions apart to do so.

And what of former CEO Tom LaSorda, the guy who had to deal with all the crap Daimler dished out, who Dieter Zetsche ordered to cook up a turnaround plan even as Chrysler's German masters were making plans to dump the company? Indeed, it's only been a few weeks since Cerberus Chairman John Snow praised LaSorda and his turnaround plan at a Detroit Economic Club luncheon.

The party line: LaSorda "agreed" to stay on as vice-chairman and president. Nardelli says LaSorda will "continue to have primary interface, responsibility and authority of working closely with UAW."

Of course they're going to keep him around for that. LaSorda comes from a family of union activists; he has a good relationship with both the United Autoworkers Union (UAW) and the Canadian Autoworkers Union (CAW) leadership.

Nardelli, on the other hand, is about as non-union as they come. During the exec's tenure at GE, roughly six percent of the company's workforce was unionized. It's no secret that Home Depot has an almost Wal-Mart-like aversion to unions. Nardelli may not be the last person the UAW and CAW would want to see sitting across a negotiating table, but he's definitely at the back of the line.

Given Boot'em Bob's rep for ousting execs, once "Tommy" (as Nardelli calls him) finishes dealing with the unions, LaSorda's golden parachute will unfurl. Gerald Meyers, a professor of business management at the University of Michigan and former chairman of American Motors, sums up the situation: "His days are numbered. I thought they were going to give him six months. They aren't going to give him six days."

Burnham Securities' auto analyst David Healy agrees. "It's hard to interpret this move in any other way than they didn't like LaSorda's record. Clearly, they were not happy with LaSorda or they would not be making this change."

How does all this sit with the unions, who are smack dab in the middle of negotiating their new contract? UAW President Ron Gettelfinger is taking his usual ask-me-no-questions, wait-and-see attitude about the management change. Equally characteristically, CAW president Buzz Hargrove hasn't been shy about expressing his "reservations." Hargrove said he was "surprised and concerned" by the choice. "We left [the initial meeting with Cerberus] with an understanding… that Tommy and his team would remain intact."

This doesn't bode well for Chrysler's hopes of remaining a fully integrated American automaker. Clearly, Nardelli is Cerberus' hatchet man. He has no compunction about making changes to produce short-term profits, regardless of the long-range ramifications. "Strip and flip" may eventually look like it would have been the kindler gentler option. Pre-Nardelli, pre-Cerberus, Chrysler was standing on the ledge looking into the abyss. Nardelli is about to kick it off.

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  • Dr. No Dr. No on Aug 18, 2007

    Nardelli should be good for 10 fresh "Death March" columns. Cerberus, feeling Wall Street angst, succumbed to the immediacy that cost-cutting brings to the financials. This ignores the one thing that could save Chrysler: PRODUCT! It's sad that Wolfgang won't be there to launch the vehicles people want. And Cerberus won't have a turnaround: it will be a Gekko sequel (sell the parts and dump it!).

  • Seldomawake Seldomawake on Aug 20, 2007

    I, for one, am sorry to hear it. I was sorry to see what happened to Home Depot, which used to be one of my absolutely favorite stores, also. I still have a $50 gift card to Home Depot because I couldn't bring myself to buy anything there. I suspect that the Home Depot story is going to parallel Chrysler's. I also suspect that Walter Chrysler isn't going to be thrilled.

  • Islander800 That is the best 20-year-on update of the Honda Element that I've ever seen. Strip out the extraneous modern electronic crap that adds tens of thousands to the price and the completely unnecessary 400 pd/ft torque and horse power, and you have a 2022 Honda Element - right down to the neoprene interior "elements" of the Element - minus the very useful rear-hinged rear doors. The proportions and dimensions are identical.Call me biased, but I still drive my west coast 2004 Element, at 65K miles. Properly maintained, it will last another 20 years....Great job, Range Rover!
  • Dennis Howerton Nice article, Corey. Makes me wish I had bought Festivas when they were being produced. Kia made them until the line was discontinued, but Kia evidently used some of the technology to make the Rio. Pictures of the interior look a lot like my Rio's interior, and the 1.5 liter engine is from Mazda while Ford made the automatic transmission in the used 2002 Rio I've been driving since 2006. I might add the Rio is also an excellent subcompact people mover.
  • Sgeffe Bronco looks with JLR “reliability!”What’s not to like?!
  • FreedMike Back in the '70s, the one thing keeping consumers from buying more Datsuns was styling - these guys were bringing over some of the ugliest product imaginable. Remember the F10? As hard as I try to blot that rolling aberration from my memory, it comes back. So the name change to Nissan made sense, and happened right as they started bringing over good-looking product (like the Maxima that will be featured in this series). They made a pretty clean break.
  • Flowerplough Liability - Autonomous vehicles must be programmed to make life-ending decisions, and who wants to risk that? Hit the moose or dive into the steep grassy ditch? Ram the sudden pile up that is occurring mere feet in front of the bumper or scan the oncoming lane and swing left? Ram the rogue machine that suddenly swung into my lane, head on, or hop up onto the sidewalk and maybe bump a pedestrian? With no driver involved, Ford/Volkswagen or GM or whomever will bear full responsibility and, in America, be ambulance-chaser sued into bankruptcy and extinction in well under a decade. Or maybe the yuge corporations will get special, good-faith, immunity laws, nation-wide? Yeah, that's the ticket.
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