Nardelli, Robert

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Nardelli, Robert

Chief Executive Officer of Chrysler

B orn Robert Louis Nardelli, May 17, 1948, in Old Forge, PA; son of a plant manager and a homemaker; married Susan, 1971; children: three sons, one daughter. Education: Western Illinois University, B.S., 1971; University of Louisville, M.B.A., 1975

Addresses: Office—Chrysler LLC, 1000 Chrysler Dr., Auburn Hills, MI 48236.

Career

V arious positions, General Electric (GE), 1971-88; executive vice president and general manager of worldwide parts and components, Case Corp., Racine, WI, 1988-89, executive vice president and general manager of construction equipment group, 1989-91; president and chief executive officer of Canadian Appliance Manufacturing Company, Toronto, Ontario, Canada, GE, 1991-92, president and chief executive officer of GE Transportation Systems, Erie, PA, 1992-95, president and chief executive officer of GE Power Systems, Schenectady, NY, 1995-2000; president and chief executive officer, The Home Depot, Inc., 2000-02, then chairman, president, and chief executive officer, 2002-07; chairman and chief executive officer, Chrysler LLC, Auburn Hills, MI, 2007—.

Member: Board of directors, the Coca-Cola Company, 2002-05; President’s Council on Service and Civic Participation, 2003-c. 2007.

Awards: Distinguished Pennsylvanian Award, Gan-non University, 1995; Distinguished Alumni Award, Western Illinois College of Business & Technology, 1997; executive of the year, Schenectady County Chamber of Commerce, 2000; Alumnus of the Year Award, University of Louisville, 2001; honorary degrees from the University of Louisville, 2001, Sienna College, 2001, and Western Illinois University, 2002.

Sidelights

A fter spending most of three decades in various positions within General Electric (GE), Robert Nardelli was passed over to become chairman of the company, so he left to become the controversial head of Home Depot. Forced to resign as Home Depot chief executive officer (CEO) seven years later, he negotiated a settlement package, which became the hallmark of executive excess. Late in 2007, Nardelli took on new challenges when he became the head of Chrysler, the struggling American automaker.

Nardelli was born on May 17, 1948, in Old Forge, Pennsylvania. His father worked at GE, first as an hourly employee and later as a plant manager. His mother was a homemaker who raised Nardelli and his sibling. Nardelli entered Western Illinois University on a football scholarship in the late 1960s, and worked summers paving highways. He majored in business, and earned his B.S. in the subject in 1971. After earning his undergraduate degree, Nardelli joined General Electric, where he spent the next 17 years. He primarily worked in manufacturing management. His positions in GE included general manager of manufacturing for the lighting systems products division and general manager of the transportation systems division. Nardelli also worked in the appliances and lighting system business units, completing his M.B.A. at the University of Louisville in 1975.

Nardelli left GE in 1988 to take a job with the Wisconsin-based Case Corp. He began his tenure with the company in the parts and components group as executive vice president and general manager of the group. About a year later, Nardelli was given a new position within Case. In November of 1989, he was named executive vice president and general manager of the construction equipment group, including responsibilities in manufacturing, engineering, marketing, and sales. In this post, Nardelli oversaw 9,000 employees as well as manufacturing plants in the United States and Europe.

In 1991, Nardelli returned to GE. He took a job with a subsidiary, Canadian Appliance Manufacturing Company (CAMCO), in Toronto. Nardelli was the company’s president and chief executive officer. In 1992, Nardelli returned to the United States to become the president and chief executive officer of GE Transportation Systems, based in Erie, Pennsylvania. This division made locomotives. During his tenure, the business changed its basic technology from DC to AC. GE Transportation Systems also doubled in size and became more global in scope by cutting jobs and outsourcing some work.

Nardelli was given the same titles at a different GE subsidiary, GE Power Systems, based in Schenectady, New York, in 1995. When he took over the division, it was turning a profit but did not have a solid long-term outlook as the market for turbines and generators from utilities in the United States was limited. Within five years, Nardelli turned GE Power Systems around. Sales increased from $6.4 billion in 1995 to $9.7 billion in 1999. Profits in the same time period jumped from $700 million to $1.7 billion. Nardelli was able to increase these numbers by expanding the kind of equipment the division sold as well as adding a global service business to operate the equipment for customers. Major job cuts and outsourcing also contributed to the division’s turnaround. In addition, Nardelli transformed GE Power Systems through acquisitions and other deals, making 90 such transactions over the course of his tenure.

Nardelli’s success with the Power Systems unit did not go unnoticed at GE headquarters. Legendary GE chairman Jack Walsh planned on retiring in the early 2000s, and Nardelli became one of three internal candidates—along with Jeffrey R. Immelt and W. James McNerney, Jr.—to take over his job. Walsh had mentored Nardelli throughout his career as well. As the powers that be were closing in on their decision in 2000, Nardelli was seen as the strongest candidate. Edward Jones & Company analyst Bill Fiala told Beth Piskora of the New York Post, “Nardelli has probably stood out the most in the past six months. He’s managed a huge boom in his business without a stumble. He’s seen revenues double in the last 12 months.” However, Nardelli was not selected to replace Walsh, Immelt was.

After being passed over for the post, Nardelli decided to leave GE and look for new opportunities. By the end of 2000, he had taken a job at the Home Depot, a home improvement retailer. Nardelli was hired as that company’s president and chief executive officer, replacing Home Depot’s co-founder Arthur Blank, despite having no real retail experience. Given a multi-million dollar deal of stock and compensation, he also took a position on the board. In 2002, Nardelli became the chairman of Home Depot while remaining in his other posts.

When Nardelli took over Home Depot in 2000, it was a highly regarded company and the largest home improvement retailer in the world, with 1,087 stores in North and South America. Sales and reputation, especially for customer service, were strong, and there were plans to double the number of stores. Finding enough employees for these stores was a difficult task, and there were also fears about the company’s long-term health because of economic concerns, lower consumer spending, a slower home building market, and competition from rival retailer Lowe’s. By 2000, profits had only increased eleven percent from the previous year, while, in 1999, profits had increased 40 percent from the previous year.

Nardelli was charged with making the business run better in the face of these challenges. He imposed a sense of efficiency and discipline on Home Depot, something the company had sorely lacked since its founding in 1979. Other changes included trimming the number of new stores Home Depot opened in 2000 and 2001, centralized purchasing, better inventory controls, cutting costs, and transforming the management structure.

In the first three years of Nardelli’s tenure, Home Depot’s stock price fell rapidly despite modest annual increases in sales and profits. The company’s reputation for excellent customer service also took a hit as lauded full-time, well-informed personnel were replaced by fewer part-timers with less knowledge. By 2006, stockholders were increasingly unhappy with the direction Nardelli had taken the company, with falling stock prices even as sales increased, and with what was perceived as an excessive compensation for sometimes abrasive leadership. Between 2000 and 2006, he had been paid $123.7 million in compensation, not including stock options.

With the agreement of and pressure from the company’s board, Nardelli resigned abruptly in January of 2007 and was replaced by Frank Blake. Upon resigning, the Associated Press quoted Nardelli as saying, “I am extremely proud of what we have accomplished at The Home Depot since 2000 and I believe that I leave a stronger and more resilient company than when I arrived, and one that is well positioned to capitalize on the substantial opportunities ahead of it.”

Nardelli had negotiated a large severance package when he signed with the company in 2000, one of the most expensive among Fortune 500 CEOs. He received a package worth at least $210 million when he resigned, including $20 million in the form of a cash severance payment and $32 million in retirement benefits. Nardelli’s package was widely criticized as a prime example of extravagance of American executives, especially at underperforming companies. Amidst promises to investigate such situations, Congressman Barney Frank, then the incoming chairman of the House Financial Services Committee, told Ylan Q. Mui of the Washington Post, “Mr. Nardelli’s contribution to raising Home Depot’s stock value consists of quitting and receiving hundreds of millions of dollars to do so.”

It was unclear what Nardelli’s next move would be after his resignation as he was not allowed to sign with a competing company for one year. He left home improvement retail behind and signed with the new Chrysler Corporation. After a merger with a German automaker to form DaimlerChrysler failed to be profitable, the German arm decided to sell off most of the American automaker. About 80 percent of Chrysler was purchased by a private investment firm, Cerberus Capital Management. This group hired Nardelli to run the company.

As with Home Depot in 2000, Nardelli’s hiring was seen as both contentious—he had no automotive experience—and a surprise—observers believed Cerberus advisor Wolfgang Bernhard would get the job. By taking the post, Nardelli was presented with a chance for redemption as he was charged with returning the company to profitability. He was confident as he took over at the automaker, despite naysayers. Nardelli told the New York Times’ Mich-eline Maynard, “While I’m new to Chrysler, and new to the car industry, manufacturing and transportation is a business I know, I like, and I grew up in.”

When Nardelli began as chairman and chief executive officer in August of 2007, he vowed to initially only speed up restructuring plans already in motion—which included the importation of small Chinese cars and investing in fuel-efficient technology— and not to cut any further into the labor force or factory capacity beyond what was already planned. Nardelli also intended on increasing attention on international markets. In addition, Cerberus charged him with improving productivity at factories and increasing quality as well as discipline to sales.

Within a few months, Nardelli began making moves which were expected to have a long-term impact. For example, he hired James E. Press, the top North American executive of Toyota, and Philip E. Murtagh, a General Motors executive who helped build the company’s interests in China. The pair took on top executive positions, and more such hirings followed, including naming a chief customer officer, Douglas Betts who was hired away from Nissan. Cerberus also invested $500 million, making 500 improvements to Chrysler’s vehicles after Nardelli took over. While Chrysler was improving its executive ranks and its vehicles, Nardelli announced to employees that the company would lose $1.6 billion in 2007.

The situation at Chrysler remained challenging for Nardelli in 2008, although the company was on track to meet Cerberus’s goals in the first quarter. In March, he sent a memo to employees, informing them that the company would impose a vacation shut down for two weeks in July of 2008 as a cost-cutting measure. Also in March, Nardelli was the keynote speaker at the prestigious New York Auto Show. There, he stated that Chrysler would be following a plan expected to return the company to profitability in 2008 by restructuring operations and downsizing its pool of dealers. He also cut hundreds of models from the Chrysler lineup. By April 2008, Nardelli was expanding Chrysler’s car and truck building alliance with Nissan Motor Company, as part of the company’s quest to expand internationally.

Despite difficulties and doubters, Nardelli believed in himself and the company he headed. He told Fortune’s Geoff Colvin, “Chrysler has been knocked down but never knocked out. It’s always been able to come back tougher and more aggressive. That’ s what gives me hope about our ability to do this again and reposition Chrysler for America, for the auto industry, and certainly for Detroit.”