Hope Over Experience
posted by admin in Home DepotThe association of Chrysler and its new chief executive, Robert Nardelli, may go down in history as one of the most unusual matchups of corporate outcasts.
Daimlers sale of Chrysler to the private equity fund Cerberus Capital Management for about a fifth of what it paid for it must stand as one of the steepest markdowns in the history of corporate acquisitions. Mr. Nardelli became the symbol of excessive executive pay after he was ousted as the chief of Home Depot, following a series of blunders, but still walked away with a $210 million consolation package.
If ever there were a duo that needed a do-over it’s the Chrysler-Nardelli team.
Turning around Chryslers fortunes wont be easy. Once the nations third biggest carmaker, Chrysler fell to fifth place in July, while the share of Detroits Big Three of the American auto market fell below 50 percent. For Americans, the Big Three are more than car companies. They are symbols of the nations industrial might. To recover even a fraction of their former glory, however, they will have to convince Americans to also put their money where their hearts are.
And that will require making well-designed, high-quality, fuel-efficient cars that Americans want to buy and that Detroit has notably failed to produce.
Mr. Nardelli also has a difficult legacy to overcome.
The executives at Cerberus, many of whom worked with him at General Electric, believe he has the right stuff. At Home Depot, however, he alienated stockholders with his imperious style, even limiting comments at the annual meeting to one minute and one question each, and enforcing that with digital timers.
Mr. Nardelli may find it easier in the private equity world where hell have far fewer masters. But hell still need to work and play well with others, including Chryslers dealers and the companys unions, whose support he needs to reduce the costs of its pension and health care commitments and to pull off a restructuring plan that would eliminate 13,000 more jobs.
Mr. Nardellis pay which has been reported to be $1 a year plus a chunk of equity to ensure he is compensated only if the funds investment pays off should also align his interests with Chryslers fortunes in a way that they were not at Home Depot.
Even if Mr. Nardelli is paid for performance, it is unclear what performance means for Cerberus. Mr. Nardelli has already hinted he may sell some of the companys assets, and some analysts fear Cerberus could dismember it. That’s not the sort of comeback story Chryslers employees, and most Americans, are rooting for.
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