A Familiar Face Back at Chrysler

How Cerberus Will Employ Bernhard's Strong Hand in Chrysler Turnaround

By GINA CHON

WALL STREET JOURNAL - - Early this month, as speculation about who would buy DaimlerChrysler AG's Chrysler Group intensified, some Chrysler employees spotted a familiar figure striding through the main lobby at the Auburn Hills, Mich., headquarters. Wolfgang Bernhard was back.

In the days since the announcement that Cerberus Capital Management LLP would take an 80.1% stake in Chrysler, Mr. Bernhard, the former No. 2 executive at Chrysler and now a Cerberus adviser, has taken an increasingly visible role at his old employer.

The day after DaimlerChrysler announced its plan to sell a majority stake in Chrysler to Cerberus, Mr. Bernhard was at a meeting with Chrysler Chief Executive Tom LaSorda. The same day, Mr. Bernhard, who was Chrysler's chief operating officer during its turnaround effort earlier in the decade, attended crucial meetings with Chrysler's union leaders, along with Mr. LaSorda and Cerberus founder Stephen Feinberg.

Mr. Bernhard, 46 years old, is making the rounds at Chrysler's design studios, pointing out in detail what he likes and what he doesn't like and doling out assignments to employees the way he used to when he was No. 2 at Chrysler to Dieter Zetsche, now Daimler's chief executive, people familiar with the matter said.

Company officials have stressed that Mr. LaSorda will remain chief executive. Mr. Bernhard, however, is poised to have a prominent role, as well. A person familiar with the matter says he will answer to Mr. Feinberg, not Mr. LaSorda, on Chrysler's performance. Mr. Bernhard already has an office on the executive floor at Chrysler's headquarters.

RIDING SHOTGUN?

• Familiar Face: Chrysler alumnus Wolfgang Bernhard, now a Cerberus adviser, has a key role at Chrysler.

• At the Top: Officials stress that Tom LaSorda will remain CEO, but he will work closely with Mr. Bernhard.

• Getting Along: Observers say two executives in lead roles could be a challenge, but their skills may also complement each other.

Mr. Bernhard isn't a "background kind of guy," says Canadian Auto Workers union President Buzz Hargrove, who praises Mr. Bernhard as straightforward, bright and tough. "He was always good to deal with because you could always hold him to his word and if he said a problem would be solved, it would get solved," Mr. Hargrove said.

Many at Chrysler, including Mr. LaSorda, who worked under Mr. Bernhard in the past, say they welcome his return. Whether the smooth sailing will last remains to be seen, especially if Mr. LaSorda's restructuring plan fails to deliver better financial results fast enough. Chrysler had a $1.48 billion operating loss last year as it grappled with a consumer shift to more-fuel-efficient cars and high costs in North America, and it projects it will return 2.5% profit on sales by 2009, which Mr. LaSorda has acknowledged is a modest goal.

Messrs. Bernhard and LaSorda weren't available for comment for this article.

Cerberus and Chrysler have made it a point to emphasize that Mr. LaSorda is in charge at Chrysler, trying to quash speculation that Mr. Bernhard could take over his job. Mr. Bernhard won't be a part of Chrysler's executive team, the company says.

Cerberus is known for expecting fast turnarounds, and a person familiar with the matter said Mr. Bernhard will help keep the pressure on Mr. LaSorda and other Chrysler executives to bring Chrysler back in the black.

Catherine Madden, a senior auto analyst with research company Global Insight, said Messrs. LaSorda and Bernhard may establish a nontraditional relationship at Chrysler, which could work to their advantage. She noted that at General Motors Corp., Vice Chairman Bob Lutz is in the media spotlight as often as Chairman and CEO Rick Wagoner. But the roles of Mr. Lutz and Mr. Wagoner are clear, with one being a product guru and the other a finance man.

Messrs. LaSorda and Bernhard also have complementary attributes, with Mr. LaSorda having a strong manufacturing background and Mr. Bernhard having a knack for products.

Ms. Madden said if it appears the two men share leadership roles, it would present a challenge, as employees need to know who is in charge and have confidence in that person. The situation must not deteriorate "into a challenge between the two people. Only time will tell if this can last."

Mr. LaSorda said this month that he and Mr. Bernhard are close friends and it would be "crazy not to tap him," given his experience and talents when it comes to product development, cost cutting and operations. Mr. LaSorda also said he doesn't have an ego when it comes to asking for help when it is needed, and he will look to Mr. Bernhard when he wants his assistance.

"I've got a great bench at my disposal," Mr. LaSorda said.

Mr. Bernhard was hired by Cerberus this year following a turbulent three-year period during which he sought to lead wrenching overhauls at two storied auto makers, Mercedes-Benz and Volkswagen, only to be forced out after clashes with his superiors.

In 2004, DaimlerChrysler named Mr. Bernhard head of Mercedes. The company rescinded the appointment three months later, after Mr. Bernhard clashed with then-CEO Jürgen Schrempp over corporate strategy. Mr. Bernhard left the company later that year.

Mr. Bernhard then went to Volkswagen AG to eventually become head of the core Volkswagen brand. At Volkswagen, Mr. Bernhard persuaded the company's powerful German union to accept a 20% wage cut for some workers by threatening to shift production of a planned sport-utility vehicle outside Germany. VW Chief Executive Bernd Pischetsrieder, who had backed Mr. Bernhard, was pushed out late last year, and Mr. Bernhard followed in January.

Now, Mr. Bernhard could get an opportunity to prove himself again, albeit in a different role. When Mr. Bernhard was at Chrysler the first time, he and Mr. Zetsche helped lead a turnaround that for a time appeared to prove that a big Detroit auto maker could overcome the handicaps of high-cost labor and weak brands with a combination of aggressive cost cutting and smart, stylish vehicles. The Chrysler 300 sedan, brought out on Mr. Zetsche's and Mr. Bernhard's watch, was a runaway hit.

The success proved fleeting, and the company was back in the red in 2003 and again in 2006.

This month, Mr. LaSorda acknowledged that the pressure is on to produce a durable, sustainable recovery at Chrysler, a challenge that has eluded leaders of the company since Lee Iacocca. Mr. LaSorda says he and Cerberus have faith in his restructuring plan that calls for 13,000 job cuts and a $3 billion investment in engine systems. Mr. LaSorda has also said he knows his job could be in danger if he doesn't produce results, but he said that would be the case no matter who owned Chrysler.

"They [Cerberus] have deep pockets, but we've got to deliver," Mr. LaSorda said at a news conference.

Write to Gina Chon at gina.chon@wsj.com