Bob Nardelli new Chrysler boss

Chrysler hires Nardelli as boss

Can we trust anybody whose name ends in a vowel? Aside from that, Nardelli
comes from a non-automotive background. He knows how to peddle, but, so
what? You might as well put my wife in charge of Chrysler being she knows
how to cook and clean. Seems I remember Walter Chrysler was a mechanic,
wasn't he? Am I to believe there is no one in this company that knows cars
inside and out and can't better run Chrysler than a guy who best knows how
to push lumber out the door?

 

I was a little surprised. You need to remember that Home Depot just paid
him $210 million to LEAVE. Who'd hire somebody like that? How do you
motivate a man who just got paid $210 million to quit his old job?

 

Meaning?

DAS

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Um, it's not a question of motivating him with compensation.

You have to understand what Cerberus is up to. They bought Chrysler with
the idea that they will get it profitable then do an IPO and make a killing
on all the investors that buy the stock.

The problem though is the stock market has got a lot more fragile than
it was 6 months ago. Cerberus is afraid that if they don't get Chrysler
profitable soon then even if they eventually do get it profitable, they
would lose money on making it go public because they are thinking the
stock market is going to go down further.

So, how do they make it profitable quick? Simple. They squeeze all
the suppliers, they threaten the dealers with losing their franchises if
they
don't get sales up, they cut corners on manufacturing, they cut labor
by laying off people. They don't really care if what they do deals mortal
blows to the company. To do all this they have to hire someone who is
just nasty as all get out, someone who LIKES being the number one
asshole. They want the labor unions facing a CEO who the union thinks
might actually go out and do something insanely stupid, like close an entire
plant down if a few troublemakers in it manage to vote down a contract.
That's Nardelli in a nutshell.

Ted

 

Well, maybe so, but if he can save them 300 million dollars, and they have
to pay him 500 million dollars, they're going to be way in the hole. If he
can save them $500 million, then they basically haven't done anything.

Realistically, there are lots of talented people who would love to run
Chrysler for 2 or 3 million bucks, and would do it well. Carlos Goshn is
CEO of two car companies now and he makes about $3 million.

 

Look, I'd be willing to run Chrysler for a month. I wouldn't be able to
do *much* damage in that short time, then they can fire me and pay me
the same for that month as Nardelli got for each month he was at HD.

Perce

 

I've always thought that. Any institution would find it hard to keep me on
the job for $10 million a month. After a month I'd be so gone they'd never
find me. It just goes to show that American CEO's are all insane, or else I
am.

 

Why are they insane, when they reap such unjustified rewards.
I'd say they are very smart and are taking the company boards to the
cleaners.

 

No, they are taking the company stockholders to the cleaners...
I'm increasingly surprised that there are not more stockholder revolts
at annual meetings.

I suppose the only reason why there are not more stockholder revolts
is that the majority of shares in many companies are owned by mutual
funds or pension trusts.

Doug

 

Correct, but after the board approves of the stealing.

True and many individual shareholders wouldn't find it an effective use
of their time and money to go to the shareholder meetings launching a
protest that would be ignored anyway.

 

Unfortunately, very few of the stockholders these days care who the
hell is running the company and WTF they are doing, as long as the
stock price keeps going up. And equally unfortunately, stock prices
on many companies these days have very little relation to the actual
health of the company.

Since Nardelli is known as a ball-breaker they probably think the
market will assume he will gut the company to make the profits look
high, and the stock price will rise in anticipation.

Then a couple years from now when the current holders have all
sold their stock holdings and made a buck, the stockholders then
will figure out the company was gutted and the stock price will
plummet. That's the time for shareholder protests and the like.
Of course it will be too late then.

Ted

 

Well, if you say so, I must be the insane one. I can tell you if I had 100
million dollars, you wouldn't catch me going to work every day trying to get
a 2nd 100 million. They have to set an alarm clock just like I do.

 

The problem is that in order to get the job that pays 100 million you have
to be the type that would NEVER be satisfied just sitting back and living
off the money. It's one of those cruel jokes the Universe plays on us poor
humans. The poor people like us aren't content unless we had the 100
million and
the rich people who have the 100 million aren't content unless they have 200
million.

Ted

 

I've been wandering around looking at Cerberus, and while I can find a
lot of companies they've bought, I can't find any they've sold. While
they seem to operate by raising profits through cost-cutting and
selling unprofitable assets, they seem to be more long-term than just
flipping companies (if you've found a source that points to Cerberus
as flipping companies, rather than a generic statement that it's how
private investment firms operate, I'd be happy to hear it. Well, not
happy, since I'd like Chrysler to succeed, but you know what I mean).

 

..

That's no explanation. Wouldn't pension trusts and mutual fund companies be
well organized, and able to control a comany effectively?

I can tell you that at my company, our big investors can easily get what
they want when they stand their ground. If the board wants to do something
stupid, the board gets a talking to from these people, and the board has to
give in. I've seen them do it. Yet these "accountability sessions" don't
seem to extend to the issue of executive giveaways.

 

It'll be fun to watch what they do. Product-wise, I am concerned. They
won't be taking Mercedes old platforms, and I don't suppose there's much
chance of Nardelli being a product man. Maybe they'll fool me.

 

There's a good article in Fortune magazine about Cerberus, on-line
here:

http://money.cnn.com/2007/08/03/news/companies/cerberus.fortune/index.htm?postversion=2007080523

 

Interesting article, particularly on Steinberg's style. But it
doesn't seem to address my question, which is to what extent Cerberus
had chopped up companies and sold the remains (so far, I haven't seen
any reports that they have behaved that way, which is really unusual
given their love of buying companies on the verge of failure).