Former Home Depot Boss Nardelli to Head Up Chrysler

As part of the deal to sell off Chrysler to Cerberus Capital Management, former Home Depot boss Robert Nardelli is to be the chairman and CEO of the car maker. At Home Depot, he managed to maintain the stock price only by buying back shares. For this, he earned $38.1 million in 2006. Dumped in January of this year, he got a $210 million golden parachute. Best of all for Chrysler shareholders, he has no experience in the car business.

Mr. Nardelli’s “crime” at Home Depot was to enrich himself at the expense of shareholders, or so his critics maintain. Home Depot’s co-founder Bernie Marcus summed it up when he said earlier this year, “if the stock had doubled, who would have cared? Instead it went nowhere, and that’s what this is all about.”

In his defense, Mr. Nardelli points out that stock price is just one way to measure a company’s success. CNN noted, “Home Depot’s return on capital grew to almost 20 percent, about ten percentage points above the firm’s cost of capital; and sales soared from $46 billion when he arrived in 2000 to $81.5 billion in 2005. Over the same period, profits more than doubled to nearly $6 billion.” Which begs the question, if things were so great, why didn’t anybody want to buy a stock that was so under-valued?

Since Cerberus is a private entity and it owns 80.1% of the stock in Chrysler, Mr. Nardelli doesn’t face a lot of the pressures (like quarterly earnings) that Home Depot has. Cerberus is dedicated to turning the company around, and that is a huge undertaking. Daimler couldn’t do it, and when a German company can’t boost efficiency, things are about as bad as one can imagine. Cerberus and Mr. Nardelli need all the luck they can get.

His compensation package is not known in any detail, and since Cerberus is private, it may never be completely detailed in public. However reports are that he gets $1 a year plus a piece of any earnings he may generate. If he had that kind of deal at Home Depot, he might still be running it.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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