Does the Transition at Chrysler Signal Big Changes for the Big 3?

Last Updated Aug 20, 2007 4:43 PM EDT

Cerberus Capital Management LP announced today that former Home Depot Inc. Chief Executive Officer Robert Nardelli will take on the role of CEO at Chrysler, unleashing a flood of speculation about the meaning of the appointment. Nardelli left Home Depot under a cloud of controversy surrounding his compensation and the company's performance. He is the second industry outsider to be named to the top post at a big three auto maker, following Boeing executive Alan Mulally, who took over last fall at Ford.

Much of the commentary has focused on the likelihood of Nardelli giving the troubled company a radical shake up. Writing in the Wall Street Journal, Gina Chon and Ann Zimmerman interpret the change in leadership:

The arrival of two CEOs who aren't part of or beholden to the U.S. auto industry's culture and traditions is as potent a symbol of the change buffeting the U.S. auto sector as the news last week that the Big Three's combined share of the U.S. market fell below 50% for the first time. Both will play key roles in what are expected to be tough negotiations over a new national labor agreement with the United Auto Workers union, in which the auto makers want big concessions to narrow a $30-an-hour labor-cost gap with the U.S. operations of Japanese auto power Toyota Motor Corp.
Chon and Zimmerman go on to note that as the head of a private company, and thus free of the pressure of shareholders, Nardelli may find himself able to engage in more ambitious restructuring, which in turn could pressure Ford and GM to follow suit. Meanwhile, the Financial Times reports that Nardelli "would be pursuing new international alliances and partnerships."
The appointment also offers Nardelli a suitably large challenge and the freedom of action needed to burnish his tarnished reputation.

If the media chatter is all about big change, the talk from Nardelli and existing Chrysler management is all about continuity, with the freshly minted CEO and former CEO Tom LaSorda (who retains the title of president) making a show of their cooperative relationship at a press conference this morning, and Nardelli vowing to focus on implementing LaSorda's already exiting restructuring plan.

One thing certainly will be different for Nardelli at his new post. After receiving a severance package rumored to be worth $210 million from Home Depot, his new salary, reported to be $1, will certainly be a change. The NY Times explains, "Mr. Nardelli's entire compensation package will be based on Chrysler's performance; he will not be paid if the company, which lost $1.5 billion last year, does not improve."

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    Jessica lives in London where she works as a freelance writer with interests in green business and tech, management, and marketing.