Detroit's struggling automakers continue to look for outside leadership as they try to reinvent themselves amid fierce foreign competition. In a surprise move Monday, Chrysler named Robert Nardelli — the former head of Home Depot — as its new CEO.
The controversial executive is the second outsider tapped to run a Detroit auto firm in the last year.
Last September, Ford picked a proven leader from another industry, Alan Mulally, the former head of Boeing, to speed up the turnaround of its business. At a news conference Monday, Nardelli spoke about the advantages of being an outsider.
"I think what I bring is a fresh set of eyes," he said.
Nardelli, 59, did not pretend to know the auto industry, adding: "I think it's important to know what you know and know what you don't know."
A Controversial Background
Nardelli knows how to boost sales. He increased them at least 76 percent during his six years at Home Depot. But he had trouble with shareholders and public relations.
Nardelli was fired last year amid a sliding stock price and anger over his pay. His severance was $210 million, and he was often cited as an example of exorbitant CEO pay.
At Monday's news conference, a reporter asked whether Nardelli's severance package would get in the way of negotiating a new contract with the United Auto Workers.
"I hope not," he said, adding that he had already spoken with union chief Ron Gettelfinger. "The last thing I would want to be, as a part of the new Chrysler, is a distraction."
Cost-Cutting Concerns
One of Nardelli's jobs will be to reduce Chrysler's high labor costs. Like other Detroit companies, it spends far more on things like retiree health care than its foreign competitors, such as Toyota.
The United Auto Workers refused to talk about Nardelli's hiring. But Buzz Hargrove, who runs the Canadian Auto Workers, says he worries about Nardelli's history of cost-cutting at Home Depot.
"During that time, there were a lot of workers who lost their jobs, and there were a lot of managers who left the company," Hargrove said.
Some people who follow the auto industry think Nardelli has been brought in on short notice to turn the company around faster.
Earlier this year, a private-equity firm called Cerberus bought Chrysler. Since then, a credit squeeze has emerged on Wall Street, and the cost of borrowing money has gone up.
Dramatic Change Expected
Maryann Keller, a long-time auto industry analyst, says Cerberus is now under pressure to generate more money from Chrysler to pay off debt.
"There is going to be a much greater focus on really stripping costs out of this company, much faster than we might have anticipated," she said.
Cerberus may also think Chrysler's current leaders aren't up to the task of dramatic change.
Sean McAlinden, an economist with the Center for Automotive Research in Ann Arbor, says an outsider may be more willing to make drastic cuts, because he or she has no connections to Detroit or the industry.
He said the choice of Nardelli "is a comment on current Chrysler management that they probably . . . can't make the harsh decisions that Cerberus probably thinks has to be made."
For his part, Nardelli says he does not want to change Chrysler's current restructuring plan, which includes cutting 13,000 jobs. He says he just wants to speed it up.
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