Nardelli takes Chrysler's reins amid deep losses, labour strife
GREG KEENAN
From Tuesday's Globe and Mail
August 7, 2007 at 2:46 AM EDT
The transformation of the U.S. auto industry picked up speed Monday as Cerberus Capital Management LP named Home Depot Inc.'s former chief executive officer Robert Nardelli to head the new Chrysler LLC, a move that concerns Canadian Auto Workers president Buzz Hargrove.
The appointment of Mr. Nardelli as chairman and chief executive officer and the demotion of CEO Tom LaSorda to president comes several months after Mr. Hargrove thought he had been assured by Cerberus the team running Chrysler would remain in place.
Mr. Hargrove said Monday that he is seeking an immediate meeting with Mr. Nardelli to make sure Cerberus does not plan further job cuts at the company's Canadian operations in Windsor, Ont., Brampton, Ont., and Toronto.
Mr. Nardelli said he wants the third-largest Detroit auto maker to move faster on a turnaround strategy announced in February.
That strategy includes closing one assembly plant and eliminating 13,000 jobs at Chrysler's North American operations.
“If we can do it faster, if we can do it more efficiently, that's what we want to do,” Mr. Nardelli said.
The former Home Depot CEO took the reins three days after the $7.4-billion purchase of Chrysler by private equity giant Cerberus from DaimlerChrysler AG officially closed.
The events occur during a crucial time in Detroit as talks on a national contract with the United Auto Workers gear up amid tens of thousands of job cuts and the closing of dozens of plants by Chrysler, Ford Motor Co. and General Motors Corp.
“Cerberus is telling us that this is not going to be business as usual,” said analyst John Wolkonowicz of Global Insight Inc. in Lexington, Mass. “They understand that the Chrysler of today probably could not survive.”
But Peter Morici, a professor of business at the University of Maryland and an outspoken critic of the U.S. auto industry, said Mr. Nardelli's appointment is likely to hasten Chrysler's demise.
“Robert Nardelli is the wrong man for the job,” Prof. Morici said in a statement. “Nardelli is not a car guy. He can't quick-fix what Chrysler hasn't got. He lacks the background.”
Mr. Nardelli becomes the second industry outsider to be appointed to head a U.S. auto maker, following Alan Mulally, who left Boeing Co. to take on the CEO position at Ford.
The CAW's Mr. Hargrove said it was Mr. LaSorda who signed a May letter promising no more job cuts beyond what was already in the Feb. 14 restructuring plan. “Now [LaSorda] reports to someone else who may not share the same ideas,” Mr. Hargrove said. “It's a change in leadership. Obviously it's something totally unexpected.”
The CAW represents about 11,000 Chrysler workers.
As the events unfolded at Chrysler, Mr. Hargrove spoke to an audience of investors at a conference in Detroit and warned that cuts in labour costs being sought by Chrysler, Ford and GM in contract talks this year won't save the industry in North America.
“We'll make massive changes to keep our facilities efficient and viable,” the CAW leader said. “But what we won't do is accept concessions in wages, core benefits and pensions.”
Eliminating the $25 (U.S.) an hour disadvantage the companies point to versus their Asian rivals in North America would not resolve the crisis the industry faces, Mr. Hargrove declared. Even if that gap vaporized, GM's costs would only fall enough to permit the auto maker to reduce prices by 2 per cent, he said at a conference.
Instead, the companies need to address their loss of market share, which he described as being caused by imports from outside North America.
“The bleeding of market share from domestic producers, which is due first and foremost to a totally lopsided trade relationship between North America and the rest of the world, is the fundamental source of this industry's problems,” he maintained.
If anyone believes a 2-per-cent reduction in the price of GM vehicles will turn the firm around, “then I have some subprime mortgage bonds I'd like to sell you,” he said.
In the midst of those talks, GM reported a surprise jump in second-quarter profit and Ford also said it was in the black during the second quarter.
Those optimistic signs were followed, however, by news that the Detroit Three's share of their home market tumbled to less than 50 per cent in July for the first time.
Mr. Hargrove said he agreed to speak at the conference so that Wall Street has a better understanding of how the union operates. Wall Street analysts and financiers are often an unseen party at the bargaining table during contract talks, he said, pointing to a 1996 strike against General Motors of Canada Ltd. That strike was needless, but it came about in part because Wall Street commentators predicted that union demands would destroy the company.
With files from Bloomberg News and The New York Times
