Nardelli to Chrysler

Well, well. No surprise here. Cerberus is not showing up to play nicey-nicey with the UAW, all positive commentary from the past to the contrary. Nardelli as the CEO is a very explicit cost-cutting message. We will see how happy the unions end up being with this new owner. To me this is the most interesting private equity deal of the year. Either Cerberus can slash and flip in which case this will be a legendary transaction up there with Bonderman and Continental or the UAW will make its last stand and bring this whole thing crashing down. I am taking as a given that Cerberus is not going to turn Chrysler into Toyota, take a 20 year strategic approach to the business and redesign the whole culture from scratch.

As before I continue to be awed at the free pass Daimler's management is getting for: a) buying at the peak of a hit-driven company in a cyclical industry, b) selling at the bottom, c) being too weak to do what Cerberus will now do and c) destroying $36B of shareholder value along the way. That is colossal, Time Warner-AOL style value destruction, but they seem to be getting not that much heat for it.

Good overview from Edmunds

Even before the party celebrating Chrysler’s divorce from Daimler and its marriage to private equity firm Cerberus Capital Management Corp. begins for employees today, the party is over.

Last night’s announcement that the controversial former CEO of Home Depot Bob Nardelli is Chrysler LLC’s new chairman and CEO is an indication that business as those at Chrysler have known it is over.

Despite all of its claims of patience, being in for the long haul and seeming compassion, Cerberus has sent the clear message that it intends to move quickly -- and likely ruthlessly -- to turn Chrysler around. In fact, Nardelli’s compensation requires it.

No more Mr. Nice Guy.

Selection of Nardelli: Cost-cutting expansionist

While the appointment of Nardelli take the helm of the New Chrysler initially came as a shock to many in the industry, it shouldn't have.

With the first private equity firm owning a car company, business will not be as usual, and neither will those who will run the business. Already, Ford went to the outside, tapping former Boeing executive Alan Mulally to run the troubled automaker.

Cerberus obviously found Nardelli attractive because of his capability in expanding a business and his cost-slashing expertise.

In its statement, Cerberus credited Nardelli, who headed The Home Depot, from 2000 to January 2007, with doubling sales as well as the number of store operations, moving globally into Mexico and China, and delivering more than 20 percent earnings-per-share growth for four consecutive years while growing dividends from 16 cents to 90 cents per share. Nardelli also has extensive senior operations experience in manufacturing and transportation, the statement noted.

Posted on August 6, 2007 and filed under Finance.