Cerberus Capital has made a huge mistake in hiring disgraced former Home Depot Inc. (NYSE: HD) CEO Robert Nardelli to run Chrysler LLC. which it officially acquired Friday for $7.3 billion.
For one thing, he has no experience in the auto industry. Moreover, he was a horrible CEO at Home Depot, whose arrogance was matched by a lack of operational skills. The Atlanta-based retailer is in the process of selling off its HD Supply Division, which Nardelli built, to a private equity group lead by Bain Capital for $10.3 billion. Home Depot also lost market share to Lowes Cos. (NYSE: LOW) and saw its stock price fall about 8% under Nardelli's leadership.
The reasons and justifications for the appointment make no sense. The New York Times reported that Nardelli was hired for his "turnaround expertise" and won't be paid if the automaker "does not improve." I'm not quite sure what that means.
Nardelli was highly regarded when he worked for General Electric Co. (NYSE: GE) and was one of the candidates to succeed Jack Welch when he retired. That reputation got him the job at Home Depot, where he earned an outrageous compensation package and the ire of shareholders. Maybe Cerberus thinks that Nardelli can bring the GE touch to Chrysler.
Unlike Home Depot, the workforce at Chrysler is unionized. Nardelli better keep his considerable ego in check during the current round of contract negotiations, otherwise he's going to have huge problems. Though considerably weakened, the UAW will probably be as ornery to deal with as any Wall Street investor.
Nardelli has got an incentive to keep his ego in check. If he can turn Chrysler around, he may get an ownership stake in the company that will make him far wealthier than he is today. Of course, he'll still be plenty rich if he fails too.
That's one of the perks of being a failed CEO.
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Reader Comments (Page 2 of 2)
8-06-2007 @ 11:32PM
Ray Lanfear said...
Take the easy way out before disaster happens, give Nardelli, his Golden Parachute, Stock Options, Ownership
a few hundred million or so, and fire him before the Company goes under with his leadership.
8-07-2007 @ 8:16AM
Bill said...
I think Mr. Nardelli has bussiness savey but most C.E.O. are so out of touch with what the public wants the companies that hire them end up on the loosing end of their decisions. If you want to become the number one company again you should consider hiring someone with more incite and future knowledge. I for one have always favored Chrysler products above any other brand. But in the last few years the good ideas they have marketed have ended up gas guslers and severely under powered. Contact me, I'll take the job for free for the first year.
8-08-2007 @ 8:38AM
iamchavira said...
wow...chrysler will sink in 2 years under nardelli. he did to Home Depot what he did to GE. sunk both ships. GE is barely getting their reputation as a good product after nardelli left. since he outsourced the making of the product...which became poor quality, Home Depot hired him...and now have to sell of the "so-called" division that bob built. why? because it was a division built on credit. HD does not like expenses hanging over their head. HD (before bob) like to pay cash. all the profits then will go into the company. catch the drift. and under bob...the company only split once....after that...it went downhill or stagnet. so i hope the auto workers union keep a very close eye out for the workers...he will sink their jobs. i don't know what cerebus was thinking when they hired nardelli. i guess he will make chrysler a good right off....for cerebus. cause we all know nardelli was not good for HD or GE.
8-08-2007 @ 6:26PM
Richard Freedland said...
This is the beginning of the end for Chrysler. As a supplier of Chrysler since the 1950's and having experiences with past presidents of the Big 3 and the unions, as well as turnaround management experience, it is difficult to understand this selection.
In terms of time, it is impossible to understand the automotive business and establish trust and relationships with the unions, in the short period of time available to effect a turnaround. Chrysler is already far behind Ford, who apparently has made the same mistake, except that the new President of Ford has the personality and the skills but not the automotive experience to overtake Toyota and other major competitors.
Home Depot was not a turnaround and its stock lagged behind its major competitor, Lowes, while Nardelli was President. At a time when the unions are being asked for concessions, Chrysler brings in a man who appears to be hated by his own employees and walked away with an enormous severance package. The growth of Home Dept was primarily a result of the housing boom which is over and it is hard to assess the growth in a normal business cycle.
Ford has also chosen an outsider who is touted as a turnaround specialist. However, Boeing has only one major competitor for commercial airplanes which is Airbus. This is not comparable to the competition faced in the automotive business with Toyota, Honda, Nissan, GM coming on strong as well as others. A turnaround at Boeing, while commendable, is not the same as what is required to return Chrysler to profitability. The issues of health care and pensions were not on the table at Boeing or Home Depot.
The learning curve is very short in this industry and Nardelli may not have the time to learn given the immense pressure he is under to succeed.
There are many good experienced automotive executives who have the qualifications to head Chrysler. This looks like a Carly Fiorina arrangement that will not last long.
It is understandable that there are benefits of having an outsider reorganize a business but automotive is unique and relationships are critical. Few turnarounds are a result of only cost cutting without a comparable increase in revenues, marketing and sales.
Wrong man, Wrong time. Maybe they should have brought Lee out of retirement. Chrysler would never have survived without an automotive man at the helm. He had some strong support from management and the unions but it was a result of his leadership.
In terms of Jack Welsh, we know that he speaks of the importance of leadership. This is a man who left his wife, fought over a divorce settlement and runs of with another woman. He also was well compensated. That is leadership?
Next time, how about Rosie?
8-08-2007 @ 10:34PM
J. De Loach said...
Hey Nardelli--Maybe you could repair my Chrysler LHS for me out of your Home Depot MEGA LOTTERY WINNINGS...so far 2 power windows(same window),both trunk shocks,BOTH incoming and outgoing transmission sensors(REPLACED TWICE!),driverside power seat and just yesterday the inside door handle broke. This car bought brand new in 2000 and just now has 45,000miles---guess I don't drive it enough --it's wearing out sitting in the driveway!
chrysler
8-09-2007 @ 8:44AM
theavantiman said...
Mr. Nardelli was one of the clan at GE and a yes man for
Jack Welch. When he got into Home Depot, he was lost.
But he still got paid big money. did little for the company
and is now going to do the same dumb things at Chrysler, for a very big paycheck.
8-09-2007 @ 10:24PM
BRENT said...
NARDELLI WAS BROUGHT IN NOT TO SAVE BUT TO SELL. AFTER THE CONTRACT IS SIGNED WITH THE UAW WATCH HIM START SELLING ASSETS AND CLOSING PLANTS THAT THE WORKERS REFUSE TO DO EXTRA WORK FOR NOTHING.
8-12-2007 @ 3:34PM
trocchio89 said...
Well, I can sure say that all the rest of the big car makers have nothing to worry about know, JUST look how he improved Lowes when He took over HD. I am not sure why company keep making him more wealthy then he is know.........................WELL I GUESS THE OLD SAYING, YOU GET WHAT YOU APY FOR,JUST ASK HD
8-13-2007 @ 8:06AM
kevin said...
i worked at home depot.....nardelli is a moron. the stock dropped from 57 or so a share to about 44-46 in the year and 3 months i was there
9-20-2007 @ 10:51AM
CH said...
I've been with HD for many years and have watched our stock drop and our employees go from experienced, highly passionate orange blooded people bursting with HD pride to merely part timers and underpaid fulltimers who are just there for a paycheck. They used to tell us that if we're just there for a paycheck then we're in the wrong business, now thats why any of them are there. Darth Vader Nardelli instilled a culture of fear and intimidation in the management and associates alike. He bled the stock dry and the stores of any help and morale whatsoever. I traded off my Dodge shortly after the news came of the Dark Lord of the Sith's appointment to CEO of Chrysler. I will say that I am proud of myself that I weathered the culture of fear years at HD and now WE WILL SUCCEED with the new leadership in Frank Blake who is taking us back to our roots. Good Riddance BOB!!!!!! AND THE HORSE YOU RODE IN ON!!!
10-25-2007 @ 1:44PM
jackdavis said...
I hate sports analogies, but re: Nardelli [at least he might appreciate it since he's a former college football star]: If a guy can't kick, pass, or punt the ball on one team, why in the world would you think he could do it for someone else? [HD versus Chrysler--get it?]. Come on, if you stink--you stink--period.
10-29-2007 @ 8:48PM
Fernando Beltran said...
Al Gore is Promoting an Illegal Scam
The do as I say and not as I do crowd are a bunch of hypocrites. These talkers not walkers talk the talk but don’t walk the walk. What did Vice President Al Gore do to curb global warming? Would you believe absolutely nothing? Why didn’t the Clinton Administration put solar panels on all government buildings? The talkers don’t solve problems. Legislation must be passed that requires every government building and all new construction in this country to have solar panels. The deceit behind every socialist is to find a way to create new taxes rather than solve problems.
China and India comprise almost half the population in the world and will create more than half the greenhouse gases when they all own cars. Beijing is forty times more polluted than London. Thirty percent of the pollution in California migrates across the ocean from China. China refuses to comply with any regulations on global warming. China is the major cause of global warming. I would like to see Al Gore force China to stop polluting the earth. He can go over there and talk all he wants but that won’t get the job done. China has to stop the pollution.
Al Gore is promoting an illegal scam to pay indulgences for pollution. Pollution is only stopped by enforcing existing laws. Paying indulgences lets you continue with the same behavior. If this problem is really serious, then everyone must stop polluting the environment. Al Gore started a company to receive indulgences and use the money to advance his political agenda. The solution is solar energy for buildings, electric cars and desalinization plants. Solar power companies are popping up all over China. Congress better wake up and get completely behind solar energy.
We must not be fooled by a con artist. Al Gore installed solar panels on his house in Memphis only after he was exposed as a hypocrite. He lives in a house that in one week, consumes twenty times the yearly energy use of an average home, and he flies around in private planes consuming vast amounts of fossil fuel. Al Gore thinks he is allowed to pollute the earth while he tells others to ride their bikes to work. He believes in indulgences for polluting the earth. This is like fixing a ticket so you can continue to violate the law. We need is law enforcement and not a provision to allow those like Al Gore to continually pollute our earth.
While few in the world can understand carbon credits, in principle the credits are traded for a fee by middlemen with the offenders of pollution. The credits are placed into an exchange, and then sold to other violators like Al Gore. All of this does not change the amount of carbon produced, but does produce a profit for the exchange company. Did we forget to mention that Gore owns a carbon exchange company? Solar energy is the answer. Forget this scam by Al Gore. We must use solar energy for buildings, electric cars and desalinization plants.
Desalinization plants can use solar energy to boil salt water, filter the steam, condense the water and collect the water. We can also use cisterns to collect rain water. This water can be piped all over the country just as fuel is sent through pipelines. This debunks the fear mongering by Al Gore regarding rising sea levels. We can desalinate the sea water and pipe it all over the country to fill up lakes and wetlands. This water can be used to replenish the water supply in areas affected by drought. This technology can be replicated all over the world.
The house of President George Bush in Texas has geothermal heating and cooling. The system that was installed at the ranch pumps water down three hundred feet below the surface where the temperature is sixty seven degrees. It provides cooling in the summer and heating in the winter. The house has large cisterns to collect water to be used inside the house and for irrigation outside around the house. These improvements were made by George Bush before he became President of the United States. The members of Congress should have solar energy on all their homes.
Carol Browner worked in the office of Al Gore prior to becoming the EPA Administrator in the Clinton Administration. She wanted to spread toxic waste on land used to grow food for human and animal consumption. Lou Dobbs showed on CNN how feed which is grown in toxic waste will kill cows. The cows that ate the toxic feed would shake and then fall over dead. This waste contains cadmium, lead, arsenic, benzene and other toxins that should never be spread over land used to grow food. Ralph Nader was right about Al Gore.
Buying carbon credits does not protect the environment. O.J. Simpson murdered two innocent people then he bought a high priced legal team to protect him from a double murder conviction. The two victims are still dead. If Al Gore uses private jets which pollute the environment, the pollution will still remain even if he buys carbon credits. This scam allows countries like China to pollute the earth while buying carbon credits. Scientists say methane gas from cows is more dangerous than carbon dioxide.
Al Gore is promoting a one world government funded by a carbon dioxide tax. He is a socialist who wants to compromise the sovereignty of our country. A carbon dioxide tax will take money out of the pockets of the middle class and give it to worthless politicians. These greedy bastards want more money from the middle class for their pet projects. Solar panels pay for themselves in three to five years so there is no need for additional taxes. Al Gore has written his manifesto that he wants everyone to sign. This is a socialist political agenda.
Al Gore is promoting sex, drugs and rock and roll. It seems to be working with his son. Habitat for Humanity homes should install solar panels on their homes. Al Gore and Jimmy Carter need to work together to get solar energy for these homes. Solar panels can be placed over existing walkways and break areas at all government buildings. Government must mandate solar energy for all federal, state, county and local government buildings.
Thirty percent of the structures in this country are government buildings. Solar panels would provide energy for elementary schools, middle schools, high schools, universities, gymnasiums, football stadiums, sports complexes, parks, city halls, capitol buildings, office buildings, military bases, ports, airports, toll stations, subways, mass transit, libraries, museums, courts and post offices. Our worthless politicians need to lead by example and mandate solar energy.
Wal-Mart is saving millions by installing solar panels on all their buildings. Solar energy pays for itself in three to five years providing an excellent return on investment (ROI). Embassies all over the earth probably don’t even have one solar panel. The Secretary of each department in the Bush Cabinet has responsibility for thousands of government buildings. Do these buildings have solar energy? The Department of Energy probably doesn’t even have one solar panel.