Nardelli Aims to Get Chrysler Back to Where it Deserves to Be

It's called an override card. If you're a top officer at Chrysler LLC, it enables you to commandeer an elevator in the auto maker's headquarters building and turn it into an express to the top-floor executive suites.

It's a nice perk if you're in a hurry, or just not interested in making small talk with underlings from the lower floors.

Robert Nardelli, Chrysler's new CEO, says he barely knows what the override card is. “I don't use that thing. The best conversations are in the elevator (with employees),” he says. “The important thing for anyone in my position is to listen and learn. Then you can contribute a lot to the business.”

In his first 100 days as head of the newly divorced, privately held Chrysler, Nardelli has been steadily warming up not only to Chrysler's workers but also to its dealers and the Detroit media.

That's an encouraging start for an executive with a reputation for being about as touchy-feely as Darth Vader.

Most of Chrysler's workforce gasped last August when Chrysler's new owner Cerberus Capital Management LP named Nardelli CEO and essentially demoted the trusted and well-liked Tom LaSorda to the post of president and vice chairman.

Nardelli, 59, a long-time General Electric Corp. executive known for his hard-nosed management style, is not exactly a media darling. After losing a well-publicized 3-way race to succeed Jack Welch as CEO of GE in 2000, Nardelli was hired as CEO of household products retailer Home Depot Inc.

Home Depot's revenue increased from $45.7 billion in 2000 to $81.5 billion in 2005, and profits more than doubled from $2.6 billion to nearly $6 billion.

But the company's stock price went nowhere during Nardelli's tenure, while shares of competitor Lowe's Companies Inc. soared. And his results-focused, take-no-prisoners management style was criticized as too harsh on employees.

After squabbling with shareholders, and the company's board, Nardelli was ousted last January, with a reported $210 million golden parachute that made him a poster boy for corporate excess.

While he has few fans on Wall Street, no one disputes Nardelli's ability to take big industrial organizations and make them efficient and profitable. His former boss Welch told Business Week magazine Cerberus hit a home run by hiring Nardelli, and that if anyone could fix Chrysler, Nardelli could.

Supporters such as Welch say Nardelli's ability to streamline and install financial discipline in a corporation are the skills that enabled him to rise from an entry-level manufacturing engineering job in 1971 to top managerial posts at GE.

“I've had a pretty simple approach strategically: enhance the core, extend the business, expand the market. I can get that on one page. I don't need a hundred-page document to have a strategy for a company,” Nardelli says.

These clearly are the qualities that appealed to Cerberus CEO Stephen Feinberg, who hired Nardelli and has no shareholders or stock price to worry about.

Sitting down with Ward's editors in late October, Nardelli comes across as humble and eager for a fresh start. He also seems to be one of those rare breed of men who in their youth fell asleep dreaming not of hitting home runs or scoring game-winning goals, but of saving companies.

“I've got no aspirations for retirement,” he says. “I don't have a second home, I don't have a boat, I don't golf. I love doing this stuff. I really do.

“I was afforded a great opportunity to even be considered for this position by Steve Feinberg and Cerberus. I can't imagine anybody not seizing this wonderful opportunity to take 35 or 36 years of training and try to bring it together with a group of great men and women to get Chrysler back to where it deserves to be.”

Nardelli is moving swiftly to right-size Chrysler's production capacity and change it from a manufacturing-focused “push” model to a “pull” model, based more on consumer demand in the face of what promises to be a challenging year ahead.

“We're probably close to the bottom, but I'm not sure we've actually felt it yet,” he says of the future vehicle-sales outlook.

The Chrysler CEO acknowledges the pain involved in cutting massive numbers of blue- and white-collar jobs. In November, the auto maker announced it would slash another 8,500-10,000 hourly and 1,000 salaried positions over the next year, eliminating shifts at six plants.

But Nardelli says capacity cuts are needed in light of the current economic downturn that has taken nearly a million units out of the new-vehicle annual sales rate in the U.S. since the beginning of the year and Chrysler's shift to a build-to-demand production philosophy in order to lower inventories and lessen its reliance on incentives.

“Those are all tough decisions,” he says of the layoffs. “But if you don't make them, you're really not doing your fiduciary responsibility to make the tough calls to return this corporation to profitability.

“Everybody is under pressure from the housing market and from a consumer-confidence standpoint,” Nardelli adds. “And I think it is going to force all of us to be sharper, certainly more flexible, more responsive and forward looking.”

Last October's decision to dump four slow-selling models appears to be the first move in a larger effort to revamp Chrysler's entire vehicle lineup. Nardelli says a recently completed review of the auto maker's product plans will result in numerous enhancements to existing models.

Although he says he would pick up the phone if one of his counterparts from another auto maker calls, he has not heard from Renault SA-Nissan Motor Co. Ltd. CEO Carlos Ghosn, who continues to express interest in a strategic tie-up with a North American partner.

“We've been on some panels together (in the past),” Nardelli says of Ghosn. “(But) have I talked to him since I've been here? The answer is no.

“Sure I would talk to him,” he adds. “If Rick (Wagoner, General Motors Corp. CEO) calls me, I'd talk to him, too. (But) I think it's way too early to have any of those discussions.

“I think we really have got the elements here of a great company. When I look at what we have, the asset base, some of the brand recognition and so forth, I'm even more convinced today, 100 days into it, that we can achieve (our targets).”

Nardelli says recent internal product reviews have led to “probably 208 line items to enhance the vehicles we have. I think there's some things we know we want to do with some existing products to improve performance, style, touch.”

He is setting no target for reducing the size of Chrysler's U.S. dealer network.

Playing a big role in Chrysler's future product planning is its Alpha project to consolidate the Dodge, Chrysler and Jeep brands into single showrooms, a move that could see the auto maker continue to pare existing model lines that overlap.

“It's crazy to have competing products in the same room,” he says.

No timetable is given for completing the transition to Alpha, nor does Nardelli allow himself to be pinned down on the optimum number of U.S. dealers. Natural selection will serve to thin the ranks, he implies.

“I don't come after this with a target that says I must reduce 300 dealers. The right solution is what's right for the customer base,” he says. “What do we need for (market) coverage? What makes those dealers profitable? And what's the product portfolio that we offer that allows them to be profitable?”

And even though Chrysler has been on a spree of hiring top executive talent, Nardelli puts to rest speculation the auto maker still is in the market for a product czar.

“I'm pretty comfortable between (Vice Chairman and President) Jim Press, Tom LaSorda, (design chief) Trevor Creed and the group that we've got,” Nardelli says. “It isn't like we've been without success on the design side,” he adds pointing to the Chrysler 300 sedan and successful launch of the auto maker's new minivan.

Nardelli also endorses Chrysler's new “Office of the Chairman,” which includes Press, LaSorda and himself in an arrangement that often is awkward at big companies with equally large egos involved.

“We're very excited about having been able to attract (former Toyota North America President) Jim Press, but I'm equally excited that Tom LaSorda has stayed on as a real partner of mine. The three of us spend a lot of time together.”
— with Cliff Banks