Analysts question LaSorda's future at Chrysler

Dave Hall, CanWest News Service

Published: Wednesday, August 08, 2007

WINDSOR, Ont. - After being demoted less than three months into his term as chief executive of a newly-reorganized Chrysler Group, analysts are wondering whether Windsor native Tom LaSorda still has a future with automaker.

In May, LaSorda called it a "proud day" when he took over following the announcement that Cerberus Capital Management had bought the struggling company from its German owners. On Monday, LaSorda was bumped to No. 2 when Cerberus brought in Robert Nardelli, a former chief executive of Home Depot, to take over the company. Some give LaSorda less than a year before he leaves the company he briefly headed - by choice or otherwise.

Tony Faria, a professor in the University of Windsor's Odette School of Business, said the decision by Cerberus, which officially took over control of Chrysler on Friday, was a clear indication of their lack of faith in LaSorda's ability to lead Chrysler back to profitability.

"I've been saying all along that I thought Tom had one year and I still believe he'll be gone within a year either because he resigns or because Nardelli moves him out," said Faria.

But Kenneth Dalto of Kenneth Dalto & Associates of Farmington Hills, Mich. said "unless he quits, LaSorda could be there for several years because the Germans like him, the UAW likes him, the dealers and suppliers all like him and right now, Cerberus sorely needs trust and credibility.

"He brings that, plus he's a car guy and they're not car guys," said Dalto. "They don't have it in their blood - he does."

"And beyond everything else, this is a car company which needs to be making the right product decisions and I see LaSorda being part of that," said Dalto.

For now, LaSorda stays on as president of Chrysler and vice-chairman of its board with responsibility for manufacturing and labour relations for a company with 77,700 employees and 2006 revenues of $6.2 billion US.

But according to Faria, LaSorda may well view this decision as a blow to his ego and will start looking for alternative employment in the near future. Faria said that despite LaSorda's public comments about a partnership with Nardelli, he believes LaSorda's not happy with the change.

"Despite what he's saying about egos and that being No. 1 isn't important, when you've reached that level in any organization being No. 1 certainly is important," said Faria.

In the short term, Cerberus may need him more than LaSorda needs it, says analyst Erich Merkle.

I don't see Tom being there for the long term. I believe they need him to handle negotiations with the UAW but once those are over, I don't see him staying much longer," said Merkle, an analyst with IRN Inc. of Grand Rapids, Mich.

Union negotiations, which began last month, are expected to last into the fall. Merkle also said LaSorda could still be valuable on the product side of the company because decisions are being made about what happens four-to-five years from now.

"You have to make sure there are products in the pipeline and you have to make sure they're the right products for the marketplace at the time," said Merkle. Merkle pointed to the new Windsor-built minivan and the re-designed 2009 Dodge Ram as being perfect examples of good decisions made well before Cerberus even came into the picture.

"In many respects, all Nardelli and Cerberus have to do is concentrate on cutting costs and let the revenue side take care of itself because the company has strong rich life cycles in some key product programs," said Merkle.

Dalto also has questions about how long Nardelli will stay. "Nardelli is the perfect turnaround guy but he's not a consensus-builder and I don't see him being there beyond three to four years," he said.

With Nardelli acting as a "very polarizing figure, we haven't seen the end of changes at Chrysler," said Merkle.

Faria agreed, saying the departure of Chrysler chief operating office Eric Ridenour and the demotion of LaSorda are just the beginning.

"At Home Depot, Nardelli changed virtually everyone in the entire senior corporate ranks and much the same could happen again," said Faria. "In a struggling organization such as Chrysler, senior people could well be viewed as part of the problem rather than part of the solution."

Windsor Star