Nardelli Back in the Driver's Seat

Former Home Depot (NYSE: HD  ) CEO Robert Nardelli has landed on his feet, running Chrysler for its new owner, Cerberus.

Now that Chrysler's private, it has room to do things out of the public eye. Let's hope one of them isn't a monstrously rich pay package. Nardelli's already facing some big challenges -- for one, contract negotiations begin next month with the United Auto Workers union. Considering the cutbacks union members have been asked to shoulder, one would hope that management was smart enough to negotiate a pay package that wouldn't generate as much dissension as Nardelli's $210 million severance pay with Home Depot did.

While the company hasn't announced what Nardelli's pay will be, at least one news report quotes an insider saying he'll be paid $1 a year, with subsequent pay based on Chrysler's performance.

Don't put too much stock in that report, though, since $1-a-year payments can be more gimmicky than real salaries. Add in stock options, benefits, and perks, and these pauper CEOs are still getting a king's ransom in compensation. Even Steve Jobs at Apple, who has accepted a $1-a-year salary for years now, has been able to scrape by on the 10 million restricted shares he was issued a few years ago; they vested in full last year.

Is Six Sigma sick?
Nardelli's real challenge will come from implementing real change in the automaker. But let's just hope that his focus on restoring Chrysler quality doesn't resort to the Six Sigma ideas he implemented at Home Depot, which ultimately hobbled the retailer. Sometimes, ideas that work well in certain companies, as Six Sigma did at General Electric (NYSE: GE  ) , don't translate well to others. Yes, hundreds of companies have instituted the Six Sigma approach, but Home Depot was one of the apparent failures.

So far, Nardelli has yet to refer to Six Sigma; he's stated that his restructuring plan calls for cutting 13,000 jobs. The layoff isn't only for cost-cutting purposes; it'll also allow Nardelli to bring in new talent. The company needs some serious creativity right now to come up with ideas that will lure car buyers back to Chrysler's lots.

Fresh eyes, old problems
Even if Nardelli could successfully implement such a program to help design and manufacture a lower-cost car, the public wouldn't necessarily want to buy it. With sales on a downward spiral, Nardelli has called for heavy investment in fuel-efficient engines. He believes that this will help revive Chrysler's slumping sales, particularly from SUVs.

Maybe Cerberus is taking a page from Ford's (NYSE: F  ) playbook, after that automaker brought in outsider Alan Mullaly to run the company. That can certainly give a company a fresh perspective. But I think someone who knows at least something about design and consumer desires in the car industry might have been a better choice. Heading a power-generation-products division at GE doesn't exactly translate into experience useful to selling cars. And while Nardelli may have presided over doubled sales at Home Depot, nothing else about him meshed with that company's culture.

While Nardelli won't have shareholder feelings to consider this time around, he will oversee a restive workforce that may not quietly accept his seemingly abrasive manner. If the workers rebel, they could turn his tenure from a Six Sigma event into death by a thousand cuts. It will be interesting to watch the new CEO, free of automotive experience, begin his journey to revamp Chrysler.

Follow Nardelli's travails with these related Foolish articles:

Home Depot is a recommendation of Motley Fool Inside Value. You can learn more by taking a free 30-day trial today.

Fool contributor Rich Duprey owns shares of Ford but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool's disclosure policy secretly hopes tailfins will make a comeback.


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