Nardelli's silence about his Chrysler pay doesn't help reputation

2007-08-12T00:00:00Z Nardelli's silence about his Chrysler pay doesn't help reputationRACHEL BECK
AP Business Writer
August 12, 2007 12:00 am  • 

NEW YORK | Opportunity knocked, and Robert Nardelli missed it. If he really wanted to begin rehabilitating his tarnished reputation, he could have started his CEO job at Chrysler by publicly promising he wouldn't accept a penny in pay.

Instead, the former Home Depot CEO -- who left the home improvement retail chain in January with a controversial $210 million severance package -- stayed mum on what he would be making while trying to lead struggling Chrysler out of its funk.

Chrysler officials fed the media tidbits about his $1 a year salary. But they refused to provide details about any performance-based bonus Nardelli could collect should he manage to help reverse the automaker's slide.

Technically, Chrysler and Nardelli had no obligation to talk about his pay. The Auburn Hills, Mich.-based company was taken private last week by Cerberus Capital Management, which bought an 80.1 percent stake from Germany's DaimlerChrysler.

But there was an chance here for Nardelli to show that he no longer would be the poster-child for excessive executive compensation.

He got that label after collecting about $25 million a year in compensation while at Home Depot, excluding the potential value of stock options. That big money came even though the company's stock price and earnings lagged competitors during his six-year tenure, something not lost on the Atlanta-based company's shareholders who pushed for his departure.

And when they finally got him to go in January, there was something more shocking for investors to digest -- his super-sized severance.

That $210 million provided Nardelli with enough money to stay on the golf course the rest of his life, without a bit of worry about work or money. But that would have meant his corporate legacy would forever be tainted by the Home Depot mess.

"His professional reputation is in shambles," said Patrick McGurn, senior vice president and special counsel at the proxy advisory firm Institutional Shareholder Services. "If he wanted to work, he was radioactive in terms of public company leadership."

Enter Chrysler, which will allow him to serve as CEO without having to answer to individual shareholders. But the task at hand won't be easy: This isn't just his comeback, but Chrysler's, too.

Nardelli, who has no experience in the auto industry, joins money-losing Chrysler at a time it is struggling to compete with Japanese rivals. Chrysler made $3,088 less per vehicle than industry leader Toyota Motor Corp. in 2006, according to a study released Tuesday by Laurie Harbour-Felax of the Chicago-based consulting firm Stout Risius Ross.

The third-largest U.S. automaker is in the midst of a turnaround plan that calls for shutting at least one U.S. plant and cutting 13,000 jobs by 2009.

Chrysler could benefit from Nardelli's knowledge of manufacturing, which he learned while climbing the ranks over three decades at General Electric Co. After being passed over to succeed famed GE CEO Jack Welch, Nardelli went to Home Depot in 2000.

Less clear, however, is how he will manage the people side of the business -- something he failed miserably at while at Home Depot where he was known to be an "imperial CEO."

He will have to carefully build relationships with Chrysler's dealers, suppliers and the United Auto Workers, which just began critical contract talks with the big three Detroit automakers. They may not be public shareholders, but they surely have a stake in how this company runs.

Nardelli will also have to answer to Chrysler's private-equity owners, who will be "looking over his shoulder all of the time," said Jeffrey Sonnenfeld, a professor at the Yale School of Management.

"In the past, he has had a tin ear to any external critics," he said. "If he has learned from his failures about how to listen, then he could be a great leader."

Sonnenfeld thinks the $1 a year salary Nardelli reportedly is getting should send a signal -- that the next Lee Iacocca has come to town and some draconian moves could be ahead. The former Chrysler leader cut his salary in the late 1970s, and then used that as a lever to convince labor unions to give up billions of dollars in wages and pension guarantees.

While Iacocca also had an ego, "his mission was to save the company, not just his reputation," said Sonnenfeld, who is also the co-author of "Firing Back: How Great Leaders Rebound After Career Disasters."

Nardelli and Chrysler are saying that the new CEO's pay is completely tied to the company's performance. But by refusing to divulge any details on how the performance component of his compensation will work, they've left many people wondering. Chrysler declined further comment.

Copyright 2014 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Follow The Times

Latest Local Offers

Featured Businesses

In This Issue

Professionals on the Move Banner
Get weekly ads via e-mail



Do you think the Lake County Solid Waste Management District should pay its new director less than its former director?

View Results