Tom LaSorda:

The New Chrysler II: Lots of Noise, Questions, and Endless Speculation

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The furor surrounding Cerberus’ decision to make Bob Nardelli, formerly of Home Depot and GE, the CEO and chairman of the New Chrysler II, putting Tom LaSorda in the Number 2 position instead of Number 1, is the juiciest gossip train to hit the circuit since Mulally’s appointment at Ford. There has been much more noise than news this week, and here’s our contribution to the fray.

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Employees at Announcement Wanted to be in Air Conditioning or Home by the Pool
Watching both the press conference announcing Bob Nardelli’s appointment as CEO and chairman of the newly formed Chrysler LLC as well as the employee pep rally afterward, and both groups seem wary instead of enthusiastic or supportive. The backlash in the press finds little support for Nardelli. The employees, while impressed with acrobatics and fireworks, generally looked as though they’d have preferred to be in their offices that hot, muggy afternoon. Most left as soon as they sensed the formal program was over. Nardelli says he’s here to bring laser-focus and energy to the turnaround plan already laid out and in progress. His presence in front of employees didn’t bring energy, and returning to finish the last few days of a family vacation the next day didn’t display laser focus.
Nardelli’s been characterized as a drill sergeant with little people skills, and he’s entering a vibrant company full of strong personalities. Being private gives Chrysler LLC the ability to make decisions based on long-term health instead of short-term profit-and-loss statements. But Cerberus expects a quick turnaround and their investors do expect a return. Nardelli may be playing to a different audience, but the pressure will be no less intense.
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Huh? Bob Nardelli Formerly of Home Depot Heads The NEW CHRYSLER

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When Bob Nardelli left as CEO of Home Depot in January, he got a tidy bonus of $210 Million. Must have made a huge investment in Cerberus Capital Management because they just named Nardelli instead of Wolfgang Bernhard CEO of The New Chrysler Corporation. This is expected to be officially announced at a press conference on Monday morning August 6 in Auburn Hills.
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Mass Retailer Heads Chrysler – “Adjustments” Begin in Management Chairs
The surprise appearance of Nardelli on the scene – a man with supposedly no automotive experience but good experience running one of the biggest retail chains in the USA – leaves us guessing where the various players will eventually alight.
Early reports say that Bernhard declined the CEO position for personal reasons. Tom LaSorda, Chrysler’s CEO until Nardelli’s appointment, is expected to remain on board as Vice Chairman and President… kinda the Chief Operating Officer. Rumors have it that LaSorda is taking calls concerning future opportunities outside Chrysler. It’s tough to become a supporting player after having first chair even under the umbrella of DaimlerChrysler.
Eric Ridenour, a highly respected car guy and until now the Chief Operating Officer working with LaSorda has elected to leave the company to explore other opportunities.
The Zero Dollar Man – No Pay Until Chrysler is Profitable

Back to Nardelli’s $210 million. Reportedly he will not take a salary until The New Chrysler has turned around. But since Chrysler no longer has to report to Wall Street we may never know the actual story here.
Cerberus’ move to have Nardelli is a brave one. The auto industry has numerous examples of industry outsiders who have been chewed up and spit out by the old gang. Cerberus has a legion of former industry execs to call upon. The assumption here is that Cerberus thinks they can find a way either by force of Nardelli’s own style, or with the help of gray-haired former execs, to have Nardelli succeed and excel at the help of The New Chrysler.
Stay tuned, more to come from Monday’s meeting in Auburn Hills.


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Detroit News: Big Changes Loom for New Chrysler

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This article citing input by AutoPacific’s George Peterson appeared on Thursday, August 2, 2007 in The Detroit News
Big changes loom for new Chrysler
Bill Vlasic and Christine Tierney / The Detroit News

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While CEO Tom LaSorda, left center, will continue to lead Chrysler’s executive team, analysts expect Wolfgang Bernhard, Chrysler’s former COO, right center, to drive most of the changes on the product side. This photo was taken at the signing of the Chrysler/VW minivan deal. © bilde 2007
AUBURN HILLS — The concept car had been shown publicly and critiqued internally. Business plans had been written, and Chrysler Group executives had debated for months whether to build the flagship luxury sedan.
But it would be up to Wolfgang Bernhard to ultimately approve or kill the Chrysler Imperial.
In mid-July, the incoming chairman of Chrysler made his call in dramatic fashion at a final product review, according to people familiar with the event.
“That car,” Bernhard said, “will never see the light of day.” [VehicleVoice Comment: Thank you. Thank you. Thank you for preventing another blight – the Aztek-ugly Chrysler Imperial – on the American roads]
His swift decision is a preview of how Chrysler will operate under Cerberus Capital Management, the secretive private-equity giant that will soon complete its $7.4 billion buyout of the No. 3 U.S. automaker.
With Cerberus exec Bernhard as its hands-on chairman, Chrysler is expected to move quickly and forcefully to turn around its sagging domestic operations and grow its international business.
Cerberus is expected to close on its acquisition of Chrysler from DaimlerChrysler AG as soon as Friday, according to people close to the process.
It’s the deal of the decade in the global auto industry and the beginning of a new era for Chrysler, the smallest of Detroit’s struggling Big Three automakers.
Big changes are in store for the new Chrysler, including the possibility of an expanded alliance with Korean automaker Hyundai Motor Co. and a deal to build cars in Russia, The Detroit News has learned.
But overseas projects and U.S. product moves are only part of the transformation awaiting Chrysler, which lost $680 million in 2006.
After nine years as a division of a domineering German parent company, Chrysler will get a much-needed fresh start as the prized possession of Cerberus.
‘We bring a fresh set of eyes’
Led by its hard-driving founder Stephen Feinberg, the New York-based private-equity firm owns more than 50 companies and applies cutting-edge business techniques to its corporate turnarounds.
“We are a lot more than a financing company,” said John Snow, Cerberus chairman and a former U.S. Treasury Secretary. “We bring a fresh set of eyes that looks at a company’s problems from another vantage point.”
Since agreeing to buy Chrysler in May, Cerberus has sent squads of financial and management experts to Auburn Hills to assess the company’s strengths and weaknesses.
Bernhard, Chrysler’s chief operating officer from 2000-04, has swept through the organization like a whirlwind — poring over product plans, brainstorming with executives, checking on even routine events like press previews for the minivan launch.
The level of oversight by Cerberus might surprise outsiders who expect the firm to stay in the background at Chrysler, said one private-equity expert.
“A lot of people think private equity is just all about financing, and it’s not,” said David Brophy, director of the Office for the Study of Private Equity at the University of Michigan.
Brophy said the bulk of Cerberus’ attention will focus on Chrysler’s core activities — purchasing, manufacturing, product development and sales and marketing.
Sources close to the situation said Cerberus insisted that detailed performance goals for Chrysler and its executives be written into the buyout deal.
“The trademark of private equity is to set high goals for a company where it’s not doing well,” Brophy said. “With Chrysler, you’ve got to turn your attention to making cars that customers want.”
Chrysler slipped behind Toyota Motor Corp. to fourth place in U.S. sales last year, and seems stuck at a 13 percent share of the market.
This year, Chrysler’s U.S. sales are down about 2 percent through July.
A new minivan model this fall should boost sales, but Chrysler’s longer-term challenge is to differentiate its products and brands from rivals General Motors Corp. and Ford Motor Co.
“They need to really decide who they want to be, and make sure the product line supports that,” said Wes Brown, a California-based automotive brand consultant.
Chrysler insiders said the flashy Imperial concept clearly didn’t fit the brand’s “premium” image, and Bernhard was correct to dump it.
People close to Chrysler also said the retro-styled PT Cruiser will go out of production when its current model ends in 2009.
The resurgence of Chrysler’s lineup will depend on the success of restyled versions of bellwether models such as the 300C sedan and Ram pickup, as well as all-new products, such as the Dodge Challenger muscle car and a crossover vehicle slated for production in Mexico.
“They need to recapture their spark,” said George Peterson, president of the consulting firm AutoPacific in Tustin, Calif.
“They need to pay more attention to the interiors of their vehicles, and just do a lot of the product stuff better.”

While CEO Tom LaSorda will continue to lead Chrysler’s executive team, analysts expect Bernhard to drive most of the changes on the product side.
A charismatic leader with experience at Mercedes-Benz, Chrysler and Volkswagen, Bernhard is known as both a champion of edgy designs and a disciplinarian on costs.
“Wolfgang will be good for the product because that’s his skill,” said Dennis Pawley, who headed Chrysler’s manufacturing operations in the 1990s. “If they can successfully execute the right products, they’ve got a chance.”
Chrysler looks abroad
Under Cerberus, Chrysler will also be pushing harder to build its international presence.
The automaker is committed to launching eight new vehicles outside of North America this year, but other moves appear to be in the works.
People close to the company said Chrysler is in discussions with Hyundai to expand ties beyond their three-way alliance to build engines with Mitsubishi Motors Corp.
A Hyundai source said “the door is always open to new talks on new proposals,” but declined to specify potential areas of cooperation with Chrysler.
Chrysler already has cut a deal to purchase Chinese-made small cars for sale in the U.S., and is working on a partnership with a Russian automaker, according to a person familiar with the plans.
Extending its global reach is critical for a company that sells about 90 percent of its overall volume in North America.
“You can’t gain the scale you need just from a regional perspective,” said a consultant to Chrysler, who spoke on condition of anonymity. “You need to look outside North America.”
Chrysler is also gearing up to purchase more components in low-wage nations in Asia. The effort began before DaimlerChrysler put the U.S. automaker up for sale in February, but has intensified since Cerberus agreed to acquire it.
In fact, Chrysler insiders said the Cerberus deal has been like a shot of adrenaline throughout the entire organization. “Things are moving very, very fast here,” one Chrysler official said.
Cerberus has kept its specific plans for Chrysler close to the vest. Feinberg declines all interview requests, and Cerberus officials speak only in the most general terms when discussing their corporate holdings.
“Our job is to ask the difficult questions and to create an environment where management teams can succeed,” Snow said in an interview in Detroit last month.
The tone is set, however, by Feinberg, the reclusive financier who masterminded the buyout.
‘They need to deliver’
Operating out of a suite of offices on the 22nd floor of a Park Avenue skyscraper, Feinberg runs a lean organization with fewer than 200 full-time executives.
“There’s very little bureaucracy at Cerberus,” said one former executive of the company, who asked not to be identified. “Things go right to the top at Cerberus, and Steve is known for making decisions on the spot.”
Executives at Cerberus-owned companies are given performance targets, and are said to have an unusual amount of autonomy to achieve the goals.
“He gives each management team a chance to deliver the goods,” said the former Cerberus executive. “But they need to deliver.”
People close to Chrysler said LaSorda has made several trips to Cerberus’s New York offices in recent weeks. Chrysler insiders said Feinberg already has a deep understanding of the company’s inner workings.
“This is a guy who never asks a question he doesn’t already seem to know the answer to,” said one Chrysler official. “He really does his homework.”
People familiar with the Cerberus buyout said that LaSorda and other senior Chrysler executives stand to earn huge cash bonuses if they achieve performance targets.
Unlike a publicly traded company, Chrysler will not have to disclose its compensation plans.
“The newspapers were full of pictures of the big smile on Tom LaSorda’s face after the deal, and that’s because there’s a big payoff if Chrysler succeeds,” said Brophy of U-M.
But with Cerberus looking at perhaps a five-year time frame to return profits to its own investors, Chrysler can’t afford to get off to a slow start.
“The key to private-equity deals is to get a return on the investment in a relatively short period of time,” Brophy said. “If the limit is five years, well, there’s not a lot of room for mistakes.”


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The Chrysler Corporation Returns

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Chrysler is Back in Private, American Hands; Current Management Stays On
On Monday, May 14, DaimlerChrysler and Cerberus announced the pending sale of the Chrysler Group, including Chrysler Financial. Among the firestorm of conferences, board meetings, and announcements following, we attended a Chrysler press conference where the new Chrysler Corporation boss Tom LaSorda gave a short briefing and took some direct questions.

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Perhaps the most significant element of the change in ownership is not who makes up the management team, or even in which country home base now is. It isn’t whether or not Wolfgang Bernhard returns to Chrysler, or even who is the boss. It is that the new company is privately held.
The new Chrysler Corporation is not required to report quarterly (or annual) sales, profits, returns, management salaries, production, or most of the other indicators that Wall Street watches so closely. The negative of quarter-by-quarter reporting and evaluation is a tendency to think short term, which can be deadly for a business whose core products have a four- to six-year natural lifecycle. (Including LaSorda’s and other managers’ salaries, which he seemed nearly gleeful that he’ll no longer report.) When pressed, LaSorda cited short-term focus as the driver for the ill-fated sales bank strategy, and as something done to please the German bosses and done against long-term strategy and goals. As a private company, LaSorda says, they “will be able to run it as we want, without worrying about quarterly numbers and what people think of them.” Chrysler Corporation will not report quarterly earnings (nor management salaries/benefits), and LaSorda would not commit to continued reporting of monthly unit sales.
LaSorda expects a Cerberus to demand a similar level of governance than they are used to, and they will have to ultimately make money for them. They will also need, as LaSorda recognized, to clearly define goals and metrics for employees to be able to target and meet. But these elements need not be part of the public forum or debate, and ownership support for long-term over short-term objectives can significantly impact overall strategy.
LaSorda was clear and emphatic that the Chrysler Corporation’s management team will not change from that today at the Chrysler Group. No further job cuts are planned as a result of the new ownership, but the 13,000 cuts spelled out in February are still on the chopping block. Speculation will continue as to whether or not Wolfgang Bernhard is brought aboard again, but plans to make that change were vehemently denied.


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Chrysler Introduces Sebring at Home

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At DaimlerChrysler’s Chelsea Proving Grounds, Chrysler Group President and Chief Executive Officer Tom LaSorda introduced the new-generation 2007 Sebring. The Sebring will be in dealers by November 2006, and VehicleVoice and AutoPacific were on hand for the unveiling.

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Chrysler has promised the new Sebring is “creating inspiration in the common car,” is “as good as or better than the best mid-size sedans in the world,” and that brings “unexpected levels of style, craftsmanship, technology, and affordable performance.” Sebring offers some features new to mid-size sedans, but for the most part, it leans toward the “as good as” side of the equation rather than on the “better than” side. Safety is advanced from the current Sebring, but only to the point they match the top players. In terms of performance, the base four-cylinder should be a strong contender and Sebring offers an atypical six-speed automatic for the top V6, but at 235HP the top V6 puts Chrysler only mid-pack in the brochure horsepower wars.
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The Sebring package is well researched and well plotted. Based on our initial review in the metal, it is in the subjective area of overall styling and in the look and feel of some interior materials where we think Sebring may have landed just off the mark.
Value Proposition
Final pricing comes later, but LaSorda promised MSRPs lower than Toyota Camry or Honda Accord models closest in content to new Sebring models. Where the 2006 Sebring sedan has a short $20,730-$23,160 price ladder, a taller ladder is expected for 2007. The 2007 Camry and the 2006 Accord start a bit below $20,000 and go as high as about $29,000 (aside from hybrids). Chrysler has said the 2.7L V6 models will be priced closer to competition’s four-cylinder-equipped offerings. Chrysler will position this new, longer ladder so that the both top and bottom ends stay below the key competition. The Sebring may see a drop in MSRP from 2006 to 2007, which may bring the MSRP closer to transaction price.
The Chrysler Group has been successful in finding a sweet spot for pricing their new entries of late; Sebring will be just as aggressively priced and well contented.


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