It didn’t take long for Robert (Bob) Nardelli to land on his feet… You’ve all probably heard by now, Bob Nardelli has been picked to run Chrysler.
For those of you that may have forgotten or were not aware of all the details:
- Bob Nardelli came from GE, where he started in 1971. In 1995 he was promoted to president and CEO of Power Systems when yours truly was there. Under his leadership, GE Power Systems grew from $6 billion to $15 billion, and earnings grew 60-70%.
- In 2000 when Jack Welch named Jeffrey Immelt as CEO of GE, Bob Nardelli left (as did the other three-way competitor for the top-GE job, Jim McNerney) to head up Home Depot, succeeding co-founder Arthur Blank.
- Bob Nardelli’s intentions were to use his GE-learnedmanagement style and systems to turn around Home Depot. But Home Depot was a 20 year old company with falling sales and stock performance. It ran out of growth in the U.S., and lacked an automated purchasing system. It was a 1980s company in the 2000s.
- Under pressure of shareholders at annual meetings and elsewhere, and complaints about Nardelli’s pay package (which the company agreed to and was in his employment contract), Bob Nardelli resigned on Jan. 3, 2007.
Many people questioned whether Nardelli’s failure to turn around Home Depot was a death knell for Six Sigma, a process improvement program (probably one of many GE management programs implemented while at Home Depot) Nardelli championed. In my opinion, anyone who has been in business understands that one program does not make or break a great company. It can, however — as in the case of Six Sigma, help people use a structured methodology to solve real-world problems and fix them so they don’t happen again.
But on to the big news: Cerberus Capital Management LP, who bought an 80.1% stake from DaimlerChrysler AG in exchange for investing $5 billion in Chrysler and $1 billion in its financing unit, has named Nardelli as chairman and CEO of its Chrysler unit.
Nardelli has to deal with sweeping changes in the auto industry, tough negotiations with the United Auto Workers union, and to close a $30-an-hour labor-cost gap with the U.S. operations of competitor Toyota. But the move to the top position of Chrysler, unlike Home Depot, puts him in a private company without the pressure of public shareholders. Nardelli’s pay — $1 per year base salary — is tied to equity and performance of the company. What matters most to Cerberus are the results.
It’s rumored that Nardelli’s experience at GE is one of the main reasons Cerberus wanted him. Many of Cerberus’s advisors are ex-GE, and according to the Wall Street Journal it’s also rumored that Cerberus is a strong believer in Six Sigma (that would make at least two private equity firms reaping big rewards by implementing Six Sigma at acquired companies).
So, will Bob Nardelli be successful in turning around Chrysler and part of the U.S. automotive industry? Time will tell. What’s clear to me at Cerberus is that running a company more efficiently can be accomplished with Six Sigma.What remains to be seen is how it will be used at Chrysler. That’s the exciting part.