Nardelli Back On Top

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.

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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.

Comments 4

  1. Anonymous

    There is more to the Home Depot Six Sigma story than Bob Nardelli. At GE Power Generation he had Ellen Smith to run the program who was a very competent leader. Home Depot chose a woman who had no idea what Six Sigma was about and even less leadership skills. Consequently she recruited an equally incompetent former Six Sigma consultant to help her with what neither understood.

    The results were predictable regardless of Nardelli’s presence or what company they were working in.

  2. jp

    I interviewed with HD in 2004 for a MBB position. It just took me a few minutes into the interview with the Director (aka. – tiger) to realize they were already in trouble.

    Weak 6S leadership, very passive approach. They were promoting BBs still in training into MBB positions… The writing was on the wall.

    I did not fit the culture at all. The recruiter (outside consultant) said that they were concerned that I would want to change the direction of their program.

    You bet I would have! :-)

  3. Anonymous

    Nardelli is taking the flack over the failure, as the CEO must take responsibility for what happens on their watch. As people see in so many situations the leadership is sold a bill of goods by someone and then they spend the next few years kicked back while the program fails.

    The down side to the publicity is that it starts the conversation that Six Sigma does not work in retail, which it does. Look at the May companies program very quiet but very successful. It also allows these completely incompetent people to shrug their shoulders, blame management and stage a repeat performance in another company. It is difficult to have any sympathy for the company since they have the resources to check them out completely. There will be another group of Black Belts who will try to do the job under these two and will wind up stranded just as I am sure the Black Belts at HD are stranded.

    This is one of those cycles that it makes you sick to your stomach to watch and there is nothing anyone can do to stop it. There is that recruiting cycle going on in the background either right now or earlier where they are being packaged and sold to the next company. You would think after a person performs poorly at a company as large as Gateway and then destroys the HD deployment someone would have the sense to put two and two together. Unfortunately the Six Sigma industry has used the management support card to excuse incompetence for so long that it has become easy for people to hide behind that excuse. Nardelli is the one that has one good result and one bad result. You don’t need a sigma calculator for the other two people.

  4. Betty Smith

    Hi Michael,
    Amazing, isn’t it?

    Betty Smith

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