Chrysler's CEO Gets A Grilling At The MPA Meeting

Chrysler CEO Robert Nardelli said the company he was tapped to run in August will succeed by rebuilding relations with dealers, getting rid of costly assets and rebuilding vehicle reliability and appeal.

Grilled by Forbes managing editor Dennis Kneale at Monday's annual Magazine Publishers of America conference in Boca Raton, Fla., Nardelli fended off questions about recalcitrant dealers, his contentious departure from Home Depot and inexperience in the automotive world, and flaws in Chrysler's new deal with the UAW.

He said the key to turning the company around is leveraging human assets. "I have been here for 100 days, and I've found an unbelievable asset in people. The average tenure at Chrysler is 20.4 years. We are into our fifth recovery period. Now it's about getting assets organized and laser-focused," he said, adding that he would institute some form of profit-sharing for employees. Recovery, he said, depends on rebuilding relations with dealers, frayed after Chrysler overproduced vehicles and tried to foist them on dealers two years ago.



"We met with 6,000 dealers. We had to reestablish a partnership rather than continue a confrontational arrangement. Their objective has to be ours. They are an extension of our company. So, re-establishing a robust relationship with dealers internally is critical," he said.

The second critical issue, he added, is "a laser-focus on priorities" including vehicle safety, security, environmental issues like the company's current wrangling with the [Bush] administration about corporate average fuel economy, and the aging workplace.

"The final piece is execution, seamlessly, with speed."

Nardelli sidestepped Kneale's question about how to deal with poorly performing dealers where Chrysler can't pull franchises because of state laws. He said Chrysler is "putting in place a five-star program" to reward strong dealers.

He said that Chrysler has the overproduction problem in hand. "Our finished inventory is 100,000 units lower this year than last. There is an immediate downside because of accounting: the minute you curtail [production] there's an immediate hit. You don't have to worry about reporting it, but those are decisions to get right-sized and 'righted' with relation to dealers."

He said that one of the major benefits of being private is his ability to make decisions briskly. "We have a saying: it's either a yes or no, but not a slow maybe. [Co-chairman] Jim Press and I recently made a decision in seven minutes that would have taken a public company three months. The private-equity guys have entrusted us and delegated us with operations.

He added that Chrysler's new status has allowed the company to get rid of "non-earning assets" far more quickly than if the company were public. "We can make those decisions because we have a real focus on cash. Over the years you have a lot of investments in land and facilities we can dispose of to help us generate it."

When Kneale drew laughs with the question, "So, what do you know about cars?" Nardelli said he drives a different Chrysler car to work every day and meets in the garage with an engineer with whom he chats about specific features.

Kneale noted that at Chrysler, Nardelli had the same reputation for pickiness, particularly with regard to vehicle interiors. Said Nardelli, "The vehicle has to be your favorite room under your roof. It has to be tranquil, with all the latest technology on board. It has to have comfort and must be 'self tutorial'."

He said that the company has to revive its reputation for engineering and reliability. "We have to resurrect that and be more forward-looking on interiors, more cost competitive," he said. "I'm not a designer but consumer. I spent six years in consumer business. We did 1.3 billion transactions a year [at Home Depot] so you get a feel of what consumers like. About 70% of what you learn [as a CEO] is pretty portable. The other 30% you have to be a dry sponge. You have to suck everything up you can."

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