Why on earth did Chrysler think it would end differently?

I mean really.

In chapter one of Rethink, I explain how Bob Nardelli destroyed The Home Depot in his cost cutting efforts by flat out missing what was most valuable to his customers (one of the ways he lowered costs was lowering wages, so all of the best people left, and the knowledgeable people were what the customers valued, it wasn’t that they had better plywood).  Cutting costs was was was needed, but “how” he went about it was a mistake. One of the reasons that story got so much attention was because after the company did so poorly, and the stock dropped so far in value, Nardelli still got an exit package of about $250 million.

So when Nardelli was hired as the next CEO of Chrysler, I was not only shocked that someone with $250 million in the bank wanted to go back to work, but that someone from a totally different industry would hire someone who had failed so spectacularly and so publicly in his previous role.

So when I read this article by Louise Story in the New York Times today, it was a little stunning just how much of a deja vu it is.  As Story wrote:

“To reduce expenses, Mr. Nardelli cut excess factory capacity and billions of dollars in fixed costs. He improved the interiors of several models, which bolstered some of its approval ratings.

But there still wasn’t a strong demand for Chrysler’s product line, which was packed with large vehicles like minivans and S.U.V.’s at a time when skyrocketing gas prices were making consumers interested in more fuel efficient cars.”

Wow.  Once again Nardelli slashed costs without asking what his customers really wanted.  Chrysler was making cars people didn’t want, so why would people buy a cheaper version of something they don’t want in the first place?

I honestly blame Steve Feinberg of Cerberus, the private equity firm that hired Nardelli.  Nardelli did EXACTLY the same thing for Chrysler that he did for The Home Depot, so in that sense I don’t blame Bob this time around, he has proven to be a one trick pony.

Maybe the next job Nardelli needs is to cut government spending in areas where people have little choice but to pay for the services, like the post office which is $7 billion in the hole this year.  At least there it doesn’t matter what the customer values.  I am not acting like a headhunter for Nardelli, but if someone is thinking about hiring him again, it’s a pretty consistent track record.

Sheesh.

-Ric