Wednesday, November 19, 2008

Chrysler's CEO on a Bailout

Chryslers CEO on a Bailout

Robert L. Nardelli, CEO of Chrysler, has faced numerous challenges in the 15 months since he took the top job: declining demand for cars, a spike in gasoline prices, calls for more fuel-efficient vehicles, and a global economic crisis that has all but crippled consumer spending.

The result: cutbacks in staffing and production, rethinking strategy and top management, and asking Congress for bailout money. Nardelli recently spoke about his tenure at Chrysler and the possibility of a government bailout for the U.S. auto industry at the Ernst & Young Strategic Growth Forum, held in Palm Springs, Calif. on Nov. 6. Edited excerpts of his responses to questions from Editor-in-Chief John A. Byrne and audience members follow:

On the culture of Detroit:

What you learn is, as you develop your tool kit, that 50, 60, 70% of your managerial skills are portable. The last 25%, you have to be a dry sponge. The toughest thing to do, before you can change your company, is you have to change yourself. So what I have found in the first 15 months is that there was a tremendous amount of insular internal focus.

I think that what we've tried to do is broaden the perspective of our leadership team…And it's not just product innovation. It's innovation in every aspect, from processes, from culture, from the leadership team.

On the widespread disappointment and disenchantment over how Detroit has missed many opportunities, and how that factors into the debate over whether the government should bail out the U.S. auto industry:

We cannot assume that we're going to get financial support. We cannot hope that the industry is going to turn around. We have to make these …you know, daring decisions to be able to get through this.

On whether Chrysler can go it alone without government support:

I think it would be very difficult to make it through this unprecedented downturn.

If you think about Chrysler alone, when we were doing the due diligence, there's around a million people dependent upon Chrysler's success. So you could say, "well, let them go down. And the country will be O.K."

I don't mean to belittle at all the loss of Lehman…but it's one thing to lose a company. I think what we're dealing with here is the loss of an industry…So if you said, "let Chrysler or GM (GM) or Ford (F) go down…if you look at the supplier base that's already as fragile as the auto industry, the manufacturers, I think you will see a rippling effect that is unprecedented.

On how Chrysler would insure its future success if it got the bailout money:

First, we should not take the money unless we have an equal commitment that the captive finance companies will either become bank holding companies or they will get [the necessary] approval so that they can provide competitive rates to the consumer, more competitive rates to the dealer.

Let's assume we get that. Then, what we'll do is continue to drive like heck to restructure. We will use this money in support of getting us through this economic trough until the economy comes back.

On whether the downturn could be a good thing, making the company more lean and efficient:

It's a painful process. I think unfortunately, if we have to go through this to really change the way the auto industry works in Detroit, then we'll be much more viable coming out the other side.

On whether Chrysler would use some of the bailout money for alternative-energy R&D:

The government has already approved $25 billion under the energy package. I would totally support that that 30% of it [or] half of it be used to create a central development center where technologies are developed cooperatively, as opposed to the redundancy of each of us doing that.

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