Nardelli back in game at Chrysler © Adam Gault / Digital Vision / Getty Images

Extra8/6/2007 1:00 PM ET

Ex-Home Depot chief to steer Chrysler

Robert Nardelli is expected to be an iron-fisted disciplinarian to make sure the automaker's plans stay on track and profitability is restored.

By BusinessWeek

Former Home Depot Chief Executive Robert Nardelli is the new CEO of Chrysler, marking the second time in less than a year that one of Detroit's struggling Big Three automakers has reached outside the automotive ranks to try to save one of America's industrial corporate icons.

Ford Motor (F, news, msgs) named Boeing (BA, news, msgs) executive Alan Mulally its CEO in September.

Nardelli was moved into the top position by Cerberus Capital Management, which last week closed a deal to take ownership of 80% of Chrysler from DaimlerChrysler (DCX, news, msgs). Nardelli, 59, replaced Thomas LaSorda, who will become president and vice chairman of the automaker.

Nardelli's move into the executive suite at Chrysler came as a surprise. Just last week, Cerberus Chairman John Snow said Chrysler management would stay intact. But former Chrysler Chief Operating Officer Wolfgang Bernhard, who had worked with Cerberus on the acquisition and was expected to be named chairman, suddenly left Cerberus in the last few days for "family reasons," according to Chrysler spokesman Jason Vines.

Nardelli, a former highflier at General Electric (GE, news, msgs) who lost the contest to succeed Jack Welch as GE's chief executive to Jeffrey Immelt, could be a jolt to Chrysler's culture. A hard-driving executive with a reputation for generating more fear than respect among the ranks, Nardelli left Home Depot (HD, news, msgs) in January under a cloud after the home-improvement chain's stock languished, customer service plummeted and the CEO was tagged by angry investors as arrogant toward shareholders.

Nardelli also became a poster boy for skyrocketing CEO pay not tied to stock performance. To make his image on that score worse, Home Depot and the CEO negotiated a $210 million "retirement package."

Besides Nardelli's appointment, Cerberus has a handful of former Chrysler executives with key advisory roles in the automaker's turnaround strategy. Retired design chief Tom Gale is advising on product development. Former Chrysler sales and marketing boss Gary Dilts, who quit the company last year in a dispute over sales strategy, now has a role in developing the company's retail strategy. And Thomas Gilman, a past executive with Chrysler Financial Services, is helping Cerberus carve out its auto-lending business from Daimler.

Those advisers will have a key role in Chrysler's planning and business strategy, but so far none has taken a key executive job. In a move that was expected, Chrysler Chief Operating Officer Eric Ridenour is leaving the company, and the position will not be filled. Ridenour couldn't be reached for comment.

Terribly mismanaged

Cerberus has also set some aggressive new business goals for Chrysler. One is to cut sales to rental-car fleets -- typically a thinly profitable or even money-losing business -- by as much as 200,000 vehicles a year. Cerberus believes that cutting rental sales will trim the supply of low-mileage used Chrysler vehicles on the market and help the company get better prices for its new cars. Cerberus also wants Chrysler to boost retail market share by 1 percentage point, to 12%, over the next three years, says one source close to the planning.

Over the past two years, Chrysler had become terribly mismanaged under CEO LaSorda and its German parent. In 2006, Chrysler lost more than $1 billion. Indeed, virtually all the gains posted by DaimlerChrysler CEO Dieter Zetsche from 2000, when he began running Chrysler, to 2005, when he left Chrysler to run DaimlerChrysler, had been wiped out by losses and restructuring costs.

Many of the company's latest models have been slow sellers. It became too top-heavy in gas-hungry sport-utility vehicles when gas prices climbed above $3 per gallon, while its marketing strategy for the Chrysler, Dodge and Jeep brands has wandered to ineffectiveness. And its dealer network is considered far too big to support its current market share.

Continued: Missed opportunities at Home Depot

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