It didn’t take Bob Nardelli long to find a new job. Running Chrysler for private equity firm Cerberus Capital Management is probably a good position for him. It will certainly allow him to avoid the investor relations gaffes that contributed to his ouster from his last job at do-it-yourself retailer Home Depot in January. But Nardelli’s enthusiasm for the management systems he used in his earlier job at General Electric might slow the car company down.
One such tool, the Six Sigma approach for defect reduction and process streamlining, didn’t work too well at Home Depot. The system is designed to improve quality and wring costs out of industrial manufacturers like GE. So it sounds tailor-made for Chrysler, which already uses similar techniques but still needs to develop high-quality vehicles to lure buyers. However, Nardelli’s application of the tool at Home Depot revealed serious drawbacks when it is applied to companies with broad retail distribution arms.
Six Sigma led Nardelli to address problems like growing competition from Lowe’s Companies and others in part by trying to optimize revenues per worker. That meant stretching staff and cutting compensation and other incentives. Those moves left Home Depot’s orange-smocked legions thin on the ground, and led to a decline in customer service, worsening the company’s problems.
Of course, Six Sigma may help Chrysler improve design and manufacturing. But like Home Depot, the automaker depends on a far-flung sales force. Nardelli may have an even harder time optimizing these relationships because car dealers have greater autonomy than store employees do.
Even if Nardelli has learned from his Home Depot problems, Cerberus’s choice remains a bit odd. Chrysler faces tough negotiations with its workers over a host of crucial cost-related issues. And its unions are unlikely to forget Nardelli’s poor standing among his former employees. Bringing in a new boss with a history of ticking off workers could be a tactic to show the United Auto Workers that Cerberus means business. Or it could just impede Chrysler’s ability to secure the concessions it needs. For Cerberus, that’s agamble.