Austrian Airlines Manager To Leave The Company

Cerberus Capital Management LP is expected today to name former Home Depot Inc. Chief Executive Officer Robert Nardelli to lead its newly acquired Chrysler unit, sending a blunt message to the Detroit establishment: No more business as usual. Mr. Nardelli, who left Home Depot earlier this year under fire for his pay package and the company's strategic struggles, will become chairman and CEO of Chrysler, making him the second outsider recently named to lead one of Detroit's struggling Big Three auto makers. He follows former top Boeing Co. executive Alan Mulally, who was recruited last fall to take over Ford Motor Co. Mr. Nardelli's appointment puts him above Chrysler President Thomas W. LaSorda, an industry veteran who had been CEO and will remain president. 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. Mr. Nardelli, who before Home Depot was a senior executive at General Electric Co., comes to Detroit fresh from bruising clashes with Home Depot shareholders and employees over his $210 million severance package, which many shareholders felt was undeserved in light of the company's performance. He had a difficult experience as the public face of Home Depot, most notably at the company's 2006 annual meeting, which he limited to a half hour by using a clock to limit shareholder comments to one minute. Mr. Nardelli also angered employees with the implementation of the Six Sigma management system, which he learned while he was at GE. But the move to Chrysler puts him in a top position at a private company without pressure from public shareholders. That could give Mr. Nardelli freedom to undertake more ambitious restructuring, and that in turn could drive rivals Ford and General Motors Corp. to rethink the pace and scope of their own overhauls. Mr. Nardelli's pay will be tied to Chrysler's performance and based on the equity value of the auto maker, people familiar with the matter said. Further details couldn't be learned. These people added that Cerberus is not worried about the controversy surrounding Mr. Nardelli's departure from Home Depot because his severance package was based on what was written in his contract, and it was not Mr. Nardelli's fault for accepting that. "I am very excited to be part of a team focused on re-establishing Chrysler as a standalone industry leader, with a renewed focus on meeting the needs of customers," Mr. Nardelli said in a statement. "Chrysler has many deeply talented and dedicated people, and I am confident that together we can continue the momentum of Chrysler's recovery and return this great American icon to a path for global growth and competitiveness." Chrysler already has a restructuring plan in place that calls for the elimination of 13,000 jobs and a $3 billion investment in engine systems designed to improve fuel economy. The company also plans to shut down its factory in Newark, Del., and will eliminate shifts at other plants. Until now, Cerberus had indicated it would keep Mr. LaSorda as CEO. Mr. LaSorda, in his role as Mr. Nardelli's No. 2, is expected to continue to be a key player in Chrysler's relations with the UAW. In addition, he will become vice chairman of a company made up of Cerberus advisers who work on companies the private-equity firm has bought. "We are very excited to welcome Bob to the Chrysler family," Mr. LaSorda said in a statement. "Bob has a proven track record of success." Mr. LaSorda couldn't be reached. Wolfgang Bernhard, a former Chrysler executive who advised Cerberus during its pursuit of the company and was expected to become Chrysler chairman, will no longer be involved with the company due to family reasons, Cerberus said in a statement. Mr. Bernhard, who couldn't be reached, will also no longer be an adviser to the firm, where he had worked for the past few months as part of its bid for Chrysler. Mr. Nardelli was also part of the Cerberus team studying Chrysler. In a move that was expected, Chrysler Chief Operating Officer Eric Ridenour is leaving the company, and the position will not be filled. Mr. Ridenour couldn't be reached. At GE, where he last headed the large power business, Mr. Nardelli had been one of the runners-up to replace John F. Welch Jr. as CEO; he was hired at Home Depot within days of news that the job was going to Jeffrey R. Immelt. Through cost cuts and aggressive sales, and helped by booming demand for power generation, Mr. Nardelli drove GE's electrical-power business to new highs in Mr. Welch's last years. During his five years leading GE's Power Systems division, it grew to $15 billion in revenue from $6 billion and its earnings expanded by 60% to 70%. He worked closely with GE's unions; previously he had run mines and locomotive factories. Home Depot, a retail business facing tough competition, proved to be a difficult adjustment. As head of a unit within GE, Mr. Nardelli had only limited experience as a public figure, and that hurt him when he got to Home Depot. He also didn't have much experience with consumers or the fickle nature of the retail business. He lured to the company several of his former GE colleagues, who also lacked retail experience. Mr. Nardelli instituted a military intern program that put Marines at his desk outside his office door, company officials have said. It came to symbolize Mr. Nardelli's ill-fated tenure at the company. His pugnacious manner helped to drive off many talented and long-tenured executives, while many employees at its 2,000 stores felt demoralized. Mr. Nardelli inherited an almost 20-year-old company with flagging sales and stock performance. It had run out of room in the U.S. to expand at the feverish pace it once kept. It also lacked automated purchasing systems that would have made it a more nimble and efficient operator. Mr. Nardelli started upgrading systems, cutting back workers to save money and instituting Six Sigma processes for evaluating store operations. Managers complained that it was too time consuming, that they didn't have time to supervise staff and help take care of customers. To ignite growth, Mr. Nardelli shifted his attention to the wholesale supply business, pouring more than $7 billion into acquiring more than two dozen companies that catered to large municipal contractors, among others. Net income and per-share earnings rose. But Home Depot's share price fell 8% during Mr. Nardelli's tenure, while competitor Lowe's Cos.'s stock more than doubled during the same period. Mr. Nardelli began to draw shareholders' ire. His compensation in his six years at the helm -- prior to his massive severance payment -- exceeded $124 million, excluding certain equity awards. As well, some investors questioned his decision to expand into the low-margin wholesale supply business. Mr. Nardelli's experience at GE is one of the main reasons why Cerberus wanted him. Many of Cerberus advisers and executives are made up of former GE employees. Cerberus is also a big believer in the Six Sigma system and other lean management strategies, according to people familiar with the matter. Six Sigma is a complex discipline that combines aspects of statistical quality control and operational efficiency analysis to attack waste. The name is a reference to the goal of driving defects or problems in a process down to 3.4 per million. Six Sigma programs have been implemented at various auto manufacturers and suppliers, including Ford Motor Co., with mixed results. Chrysler has already implemented aspects of lean manufacturing such as its flexible production system, in which a few of its factories are able to produce three different models in one plant. Mr. Nardelli's lack of experience with the complexities of auto industry product development, vehicle design and marketing could be a challenge and could send Cerberus on the hunt for executives who are familiar with these issues. So far, Cerberus and its media-shy founder, Stephen Feinberg, have given few details about their plans for the auto maker, in which they bought an 80.1% stake from DaimlerChrysler AG in exchange for investing $5 billion in Chrysler and $1 billion in its financing unit. But the experiences of other Cerberus acquisitions in the auto industry make it clear that the investment firm sets high performance goals and wants results fast. And Cerberus has been quick to make management changes at other acquisitions. Cerberus's toughness was illustrated after it took over Ganton Technologies Inc., a die-casting company, in 1996. A year later, it fired CEO Ram Thukkaram, who had been Ganton's sole owner. Cerberus said Mr. Thukkaram didn't hit his performance targets, which he readily acknowledged -- and didn't disagree with -- in a recent interview. A year after Cerberus acquired Guilford Mills Inc., a maker of textiles, in 2004, it replaced Chief Executive John Emrich, mainly because the company missed its profit targets. Also in 2004, Cerberus bought GDX Automotive, a Farmington, Hill., Mich., maker of automotive plastics. Since then the company has continued to struggle and Cerberus has changed management at least three times. Cerberus has indicated what it chiefly wants from a Chrysler leader is a new approach, given that the old approach at Chrysler led to more than $1 billion in losses last year. Cerberus Chairman John Snow said in a recent interview that one of the private-equity firm's assets is that it brings a "fresh eye" to problems facing a company. (MORE TO FOLLOW) Dow Jones Newswires August 05, 2007 23:34 ET (03:34 GMT) WSJ(8/6) UPDATE: Nardelli To Run Chrysler In -2- "We bring an intensity to a business and a new way of looking at issues," Mr. Snow said. --- Kris Hudson and Stephen Power contributed to this article.