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Chrysler's 'Mr. Fixit' in hot seat


Robert Nardelli was mobbed by reporters at an appearance in Detroit a month after taking over as head of Chrysler LLC.


DETROIT - On a balmy September afternoon, Robert Nardelli walked onto the stage in the main dining room at the Detroit Athletic Club and faced a crowd of journalists and automobile industry executives.

For more than an hour, the audience peppered the new chief executive of Chrysler LLC with questions about how he and Cerberus Capital Management, Chrysler's new private owners, planned to fix the financially troubled auto company.

Any industry executive would find that challenge daunting, but Mr. Nardelli, at that moment, had exactly one month of experience in an automotive job. Swarmed afterward by photographers and reporters, he got a sample of what it's like to be a rock star, or at least the Detroit equivalent.

The celebrity treatment was a far cry from the public crucifixion Mr. Nardelli had endured when he left Home Depot on Jan. 2, 2007, after a series of decisions that left the company hammered by the housing slump.

Back then, headlines blared about shareholder disapproval at his $210 million severance package.

Now, he has another chance at redemption, both for himself and for Chrysler, cut loose by its German parent which decided it no longer wanted to be part of the "merger of equals" that was supposed to create the first global automotive power.

He was before a big audience again last week, at the media previews of the North American International Auto Show in Detroit.

But the months since Mr. Nardelli's arrival have been anything but restorative for him, Chrysler, or Cerberus, the American auto industry's first private owner in a half-century.

Even in a city that has seen its share of strong-minded CEOs, his swift actions have set him apart.

He cut 10,000 positions at Chrysler, in addition to 13,000 announced in February; said he plans to kill three slow-selling models, the Pacifica, the PT Cruiser convertible, and the Dodge Magnum; endured a brief strike by the United Auto Workers union, whose leader originally endorsed the Cerberus acquisition of Chrysler; and parted ways with the company's longtime chief spokesman, Jason Vines.

He has made fast changes in the management team, bringing in executives who worked for him elsewhere, as well as Toyota Motor Co. veteran James Press as Chrysler's co-president.

Late last year, Mr. Nardelli rattled employees by declaring the company "operationally bankrupt" because it could not tap credit markets. He later explained the words were meant to stress a sense of urgency. But the uproar forced Chrysler to issue a statement that it had "ample liquidity," and prompted Cerberus to issue a statement of support for the CEO, often the first sign that an executive is on shaky ground.

"He's got one of the toughest jobs in America," said Michael Useem, professor of management at the Wharton School of the University of Pennsylvania. "He's obviously on an incredible hot seat."

Mr. Nardelli had a reputation, gained at General Electric while chief executive of its power systems business, as a skilled cost-cutter, something he honed to initial success at Home Depot.

That reputation made him attractive to Cerberus, which began talking to him as soon as he left Home Depot last January, said Mark Neporent, Cerberus' chief operating officer.

Cerberus did not hire Mr. Nardelli, however, until Thomas LaSorda, then Chrysler's chief executive, and Ron Gettelfinger, president of the UAW, signed off on the idea, Mr. Neporent said.

Chrysler declined to make executives available for interviews for this article.

In a statement, a Chrysler spokesman said the CEO did not want the focus to be on him, that the comeback story is about the company.

But few experts believe Chrysler can survive as an independent player, given the competition in the automobile market, where Chinese and Indian companies are expanding into a global field long dominated by American, European, Japanese, and Korean nameplates.

"It will take a radical change in Chrysler's business model to make it successful," said John Casesa, a veteran industry analyst at the Casesa Shapiro Group. "This company is too small and too limited in resources to be a competitive automobile producer, especially in a world that wants cleaner and more efficient cars."

Chrysler's lineup is still dominated by sport utility vehicles, pickups, and minivans, which made billions for the company in the 1990s but which are languishing in the face of gasoline prices of more than $3 a gallon.

Despite a wave of new vehicles that bolstered its performance early last year, Chrysler's sales fell 3.1 percent in 2007, when it ranked fourth in American sales, at 13 percent of the market. By contrast, Chrysler held 15 percent of the American market in 2005.

But the appeal of new products could not camouflage Chrysler's vehicle-quality problems, despite the vow by Mr. Nardelli's predecessor, Dieter Zetsche, that the company had turned up the heat on engineers to develop better-quality cars.

Chrysler is well behind General Motors Corp. and Ford Motor Co. among American producers and even further behind the industry's leaders, Honda Motor Co. and Toyota, in the quality surveys conducted by Consumer Reports magazine, said David Champion, its senior director of automotive testing.

Chrysler dealers, who have hung on during the company's three-decade roller-coaster ride, take issue with those perceptions. "Our products have never been better than what we have today," said Bill Golling, chief executive of a Chrysler-Jeep-Dodge dealership in Bloomfield Hills, Mich.

Mr. Nardelli recently announced plans for Nissan Motor Co. to provide Chrysler with a version of the Versa, a subcompact car, which Chrysler will sell in South America starting in 2009. The two companies, which had begun talks well before the current CEO joined the company, said they would continue to discuss other joint ventures.

Chrysler also is looking to China, where it has signed an agreement with Chery Automobile Co. that could call for Chery to build the small Dodge Hornet, due in a few years.

No matter where it strikes a deal, Chrysler is far behind its Detroit rivals in international reach. Both GM and Ford now sell more vehicles outside the United States than in their home market.

Chrysler was transferred to Cerberus debt-free, but the new owners took responsibility for $18 billion in pension and health care liabilities for Chrysler's current and retired workers, a burden that will largely be lifted in two years, when terms of a new union contract take effect. The contract creates a health care trust off the company books.

Since 1998, Chrysler has had five CEOs, compared with three at Ford and two at GM.

Mr. Nardelli's appointment jolted Chrysler employees, who had expected Mr. LaSorda to continue as chief executive.

More surprises were in store. One of Mr. Nardelli's first moves was to lure Mr. Press from Toyota, where he had been president of North American operations and the first American to hold a seat on the Toyota board.

In contrast to Mr. Nardelli, Mr. Press has a reputation for humility, often thanking incredulous journalists for their interest in Toyota when he was at that company.

Both Mr. Nardelli and Mr. Press arrived at Chrysler as red ink was deepening. It lost $1.5 billion in 2007 on top of $1 billion in 2006.

Overall industry sales, the worst in a decade last year, are expected to fall further in 2008, depressed by economic woes, the housing crisis, and high gasoline prices.

For executives, the need to fix Chrysler is keenly felt in their compensation. Under the usual structure of such deals, executives receive modest or no pay in return for a stake in the company.

The potential payoff, said to be in the tens of millions for Mr. Nardelli and other high-ranking officials, primarily comes when a distressed company turns profitable or when it is sold at a profit.

Although Cerberus has transformed several companies, it has never tackled as high-profile an acquisition, or tried a turnaround at a time when the easy money that fueled the growth in private equity had dried up.

Still, repairing Chrysler has made legends out of company executives. In the 1970s, Lee Iacocca revived it by twisting arms in Congress and obtaining a federal bailout.

In the 1990s, the two Bobs - Robert Eaton and Robert Lutz - transformed Chrysler into an envied company with the hottest products and highest per-vehicle profits in the industry before selling it to Daimler-Benz AG.

In a company statement, a spokesman said Chrysler "has been knocked down over the years, but has always managed to overcome the obstacles in its path and become a successful business again."

But Cerberus, the ultimate judge of Mr. Nardelli's performance, may be less patient than dealers, consumers, and even Congress have been in the past, Wharton's Mr. Useem said.

Mr. Nardelli's fate will be the ultimate signal. "Judgments rendered by private equity are unforgiving and hard-driving," he said.

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