Nardelli tackles 'vertical learning curve'

Carlos Ghosn said at the Tokyo auto show that Renault/Nissan is still looking for a partner. Have you talked to him? He has not called. I know him, so it wouldn’t be out of the realm of having a discussion with him, any more than with Rick (GM Chairman Wagoner) or Alan (Ford CEO Mulally), just kind of mutual respect for a peer in the industry. But, no, there have been no discussions of that nature. Photo credit: JOE WILSSENS

TALK FROM THE TOP: BOB NARDELLI


Rick Johnson
and Dave Guilford
and Bradford Wernle
Automotive News
November 5, 2007 - 12:01 am ET

Cerberus Capital Management shocked the auto world when it brought in an outsider, former Home Depot and General Electric executive Bob Nardelli, to run Chrysler. The industry word was that former Chrysler COO Wolfgang Bernhard would get the job. But Nardelli has wasted no time during his first 31/2 months on the job. The hiring of prominent executives, including Toyota's former North American leader Jim Press, has made the early press clippings seem like distant history. In his first full-length interview, Nardelli discussed Chrysler's future with Automotive News Managing Editor Rick Johnson, News Editor Dave Guilford and Staff Reporter Bradford Wernle.

It must be tough to learn not only a new company but a new industry at the same time. I've been blessed over the years to have moved over a dozen times in different businesses. So about 70 percent of what you do is pretty common, pretty portable from a management standpoint. And the other 30 percent you've almost got to be on a vertical learning curve.

What's been your impression of the car business in your first several months? It's a dynamic business. You've got these unbelievably long cycle times relative to product development. And yet you are measuring performance hour to hour, tracking retail sales by the hour by the day by the week by the month. So you've got this product development plan — three years, five years, 10, 12 years — then in every minute you get a kind of jolt of reality: "What did you do today?"

You've talked about overlap and more sharply defining the brands. Does that make you want to take some of the vehicles out that might overlap between brands? The answer is yes, and here's what we're trying to do. We're having a lot of dealer discussion — to tell us what the consumers like, what they don't like. You have kind of the emotional side of it, the voice-of-the-customer side, then you have to marry that up with the hard numbers. What's the profitability on these various models? And then the third dimension is where are we on the life cycle? So we are looking at that. I think in the not too distant future we'll be in a position to make some final calls. That decision plays right into a discussion about the dealerships relative to the product portfolio that we'll put out there that certainly will cause a migration to the Alpha dealership.

There's some stalling out there with getting Alpha deals put together. Healthy tension, yeah. I think that will take care of itself rather than us dictating it. I think it's a great idea to be able to get those brands under one umbrella and really present a powerful lineup for the consumer.

Is there a way you can devise an exit strategy for those dealers who aren't able to put these Alpha deals together? We have been doing that. The important thing here is to really make sure there isn't that adversarial relationship with these dealers. In Vegas, Tom LaSorda, Jim Press and myself had a two-hour Q&A in front of each wave of dealers. There was some frustration expressed with the fact that they felt that they were kind of jammed with product over the years, and the company maybe had a little more push philosophy than a pull philosophy. I've told the dealers our inventory is going be down over 100,000 units, and that sends a huge message of our commitment to partner with these dealers. And I think the dealers that end up profitable are the ones that will stay out there. And I think those things will kind of take care of themselves. If we do our job, they do their job, it'll be painfully evident in some cases that to serve a market area, we've got to go through this transition.

I've talked to some of the dealers that have been to Vegas, and they were more enthusiastic than I've heard Chrysler dealers be in a long time. It was a first time for me. It was an emotional experience, you know, to get a standing ovation from the dealer network — a tremendous honor for me in kind of a recognition of early acceptance. Now we've got to deliver.

You've won a lot of them over by doing some pretty high-profile hiring. Is that likely to continue? I think there'll be a wonderful blend of retention of people that are already in their positions. I'm excited about the opportunity to invest in our employees. And then if we need to fill in selected areas, we'll do that. Like any NFL draft, you go after the best.

Was that your move to get Jim Press? No. I was up in New York with Cerberus and (Cerberus Capital Management Chairman) Steve Feinberg invited him in and asked me to join him in that discussion. Jim and I hit it off right away. There was a kind of huge mutual respect for what he had done over his number of years, and I was surprised he knew my background. Quite honestly, it was a team effort. I've got the two best guys you could ask for, on the supply side with Tommy (LaSorda) and on the demand side with Jim.

Steve Feinberg has a reputation of being a very hands-on individual. How much does he figure in your daily activities? Steve has a very similar management style, and he kind of has an office of the chairman. These are guys that have been with him for a long time from the creation of Cerberus, and it's not uncommon to get a call from Steve or a call from one of the other private equity guys. But I would say through the first 100 days I couldn't be more pleased with the calls of support, as opposed to a call of a mandate. They are our biggest supporters. They gave us the financial strength to do what we need to do. And that's very, very important. Cerberus is kind of unique. They've got a couple of hundred individuals who have been plucked from very prestigious companies who bring unique skills, and we have available to us our own internal McKinsey & Co. consulting firm right there. And so we can bring them in by the day, the week, the month.

Are you doing that? Absolutely, yeah.

Any particular areas? We've got them in a couple of areas. As you might imagine, when a company goes through a marriage and then a divorce, goes from being an independent company to a division, there are some things that change. So we must put more rigor back into cash flow and cash management, because that is what keeps the doors open. So we're having to restore and reconstruct some of the fundamental processes here on cash. We've got a lot of support looking at some of the asset base that has been here for a long time, kind of idled, and they have tremendous expertise in asset disposition. We've got them coming in from information technology. We've got one coming in to bring a level of globality to our procurement and supply, supply chain management.

The lingering issue out there is whether Cerberus will follow the private equity model and sell Chrysler to a strategic investor in three to five years. Is that a valid assumption? I come here with no mandate to do that from private equity. I think we are blessed from the standpoint of Steve Feinberg. This guy is a true patriot, and one of the reasons I came here is his view for this company. He sees this as a unique opportunity to give back to his country.

Will Feinberg help you make smaller decisions, like whether you would keep the PT Cruiser, for example?
No, no. He doesn't participate in that decision. But I have an obligation to keep him informed.

There are no egos and no boundaries. So, you know, I don't get nervous about if Steve were to call Tom and ask him a question about negotiations. To me, that's very productive. Tom is handling that. You don't need to go through me; there's no bureaucracy of, "Well, I've go to call Bob to ask Tom." That would be crazy.

I think again that's a little bit of the advantage of a private equity company. You just don't have the rigidness of bureaucracy. .