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Bob Nardelli Moves to Chrysler
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Things came to a head in May 2006, when Nardelli angered Home Depot's shareholders during a shareholder meeting by refusing to take questions about the company's poor stock performance over the previous two years (which had mainly been due to a downturn in the real estate market to which Home Depot's business was closely tied). Home Depot's board eventually asked Nardelli to leave the company after he refused (some felt rightly) to consent to link his future compensation to something as tenuous as shareholder gains, granting him what was thought to be an overly generous severance package.

It was for this reason that his compensation agreement with Chrysler evoked surprise among analysts. Chrysler had been a part of Germany based DaimlerChrysler AG from 1998 until August 3, 2007, when a US-based private equity firm, Cerberus Capital Management (Cerberus) acquired an 80.1 percent stake from DaimlerChrysler for $7.4 billion.4 After the acquisition, Chrysler, which manufactured vehicles under the Chrysler, Dodge and Jeep brands, was renamed Chrysler Holdings LLC.

Nardelli was elected to Chrysler's board on the same day that Cerberus bought the company. This was followed very soon by his appointment as the Chairman and CEO. Nardelli's base salary was fixed at a token $1, with the rest of his compensation being linked to Chrysler's performance.

Nardelli's mandate for Chrysler, as it had been for Home Depot, was to help improve the company's performance. Chrysler had made a loss of $680 million in 2006.5 As of 2007, it was in the middle of a restructuring program aimed at putting it back on its feet. This involved closing eight plants and laying-off more than 13,000 people by 2009, in addition to improving product quality and expanding into emerging markets around the globe.

Chrysler also had to bear an additional burden of $19 billion in retiree benefits and healthcare costs,6 and was in negotiations with the United Auto Workers, one of the biggest unions in the US auto industry, over trimming some of these benefits. Tom LaSorda (LaSorda), who had been the CEO of Chrysler prior to the buyout by Cerberus, and who had become the President and Vice Chairman of the New Chrysler, was active in these negotiations.

Soon after his appointment at Chrysler, Nardelli announced that his immediate focus would be on implementing the restructuring plan initiated by his predecessor. "It's not about creating a new strategy. They've got it. We're going to have laser-like focus on executing that strategy. What I bring is a fresh set of eyes, a new perspective if you will," he said.7 Nardelli also said that he and his team could "continue the momentum of Chrysler's recovery and return this great American icon to a path for global growth and competitiveness."8 

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4] Martin Zimmerman, "Profile | Bob Nardelli, Chrysler CEO," Los Angeles Times August 12, 2007.

5] Julia Kollewe, "Bob Nardelli Gets Top Chrysler Job," Guardian Unlimited, August 6, 2007.

6] Katie Benner, "Robert Nardelli named CEO of Chrysler," Fortune, August 6, 2007.

7] Martin Zimmerman, "Profile | Bob Nardelli, Chrysler CEO," Los Angeles Times August 12, 2007.

8] Julia Kollewe, "Bob Nardelli Gets Top Chrysler Job," Guardian Unlimited, August 6, 2007.
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