Chrysler Hires Poster Boy of Corporate Greed

Chrysler's Hiring of Nardelli
Could Raise UAW Concerns
By JOHN D. STOLL
Wall Street Journal
August 6, 2007 9:02 a.m.

DETROIT -- Former Home Depot Inc. Chief Robert Nardelli couldn't have come to Detroit at a more fragile time, as the Big Three domestic auto makers are locked in critical labor negotiations with a United Auto Workers union that has made criticizing executive compensation a key rallying cry.

Mr. Nardelli, who recently made headlines with a $210 million Home Depot Inc. severance package, takes the Chrysler helm just days after private-equity firm Cerberus Capital Management closed its purchase of Chrysler from DaimlerChrysler AG. Mr. Nardelli has recently become the poster boy for corporate excess thanks to the severance package that drew criticism from investors, lawmakers and unions.

That image promises to not sit well with Detroit's biggest union.

UAW President Ron Gettelfinger was initially against a private-equity takeover, mostly because he believed the firms were full of people who used other people's money to "strip and flip" corporations. The union, however, surprisingly warmed up to Cerberus after being assured former Chrysler Chief Executive Tom LaSorda's so-called Recovery and Transformation Plan turnaround plan was still intact.

Now, harmony between the deep-pocketed investment firm and the 72-year-old labor union may face a challenge. Mr. Gettelfinger, in past interviews with the media, has said he supports Mr. LaSorda, whose family has deep union ties and who had been paying his own health-care tab in a show of shared sacrifice with the UAW. Mr. LaSorda, who will remain president, took over as Chrysler CEO in September 2005, and had a rocky tenure capped by Daimler AG's decision to sell Chrysler in May.

"I believe they made the right decision by keeping Tom LaSorda," Mr. Gettelfinger said in late May. "I think it's a bold move on their part to say we know very little about this industry and we have a management team in place that does."

While Mr. Gettelfinger has been an advocate of Mr. LaSorda remaining CEO, he has also been a fierce critic of excessively high executive compensation.

Most recently, the union chief took aim at Delphi Corp. Chairman Steve Miller after Delphi dished out multi-million-dollar retention packages to executives shortly after filing for bankruptcy protection in 2005. At the same time, Mr. Miller was threatening to use court protection to rip up labor contracts for hourly workers at Delphi, an auto parts maker that had been spun off from General Motors Corp. in 1999.

Even with Delphi nearly ready to emerge from bankruptcy, thanks in part to a new UAW contract, the tension created by Mr. Miller and the compensation issues still weigh on Mr. Gettelfinger. He refuses to even say the word "Delphi" in public statements, instead calling it "GM's parts operation." He refers to Delphi executives as "swine."

As colorful as the Delphi saga turned out to be, the stakes are arguably much higher as Chrysler, along with GM and Ford Motor Co., try to hammer out a new four-year contract that cedes considerable cost concessions to the auto makers. Mr. LaSorda will keep a close hand in the negotiations, but Mr. Nardelli's high-profile figure will undoubtedly loom over the talks.

In Mr. Nardelli, GM Chief Executive Rick Wagoner and Ford Chief Executive Alan Mulally have a new negotiating partner who has attracted scrutiny from other unions, notably the AFL-CIO. That union, which has teamed up with the UAW on the political front, made a punching bag of Mr. Nardelli during his tenure at Home Depot, generating several press releases criticizing his performance and compensation.

Mr. Nardelli's compensation as Chrysler chief executive will likely remain confidential, since the company is now private. Mr. Nardelli's pay will be tied to Chrysler's performance and based on the equity value of the auto maker, people familiar with the matter said. The new CEO will have breathing room to engineer a restructuring for the auto maker without the scrutiny of shareholders and Wall Street analysts.

The UAW already has executive compensation on its mind as it enters labor talks, and that could be a strike against Mr. Nardelli. In a book distributed to media in advance of the negotiations, the UAW noted "The CEOs of Chrysler Group, Ford and GM earned a combined total of $24.5 million in salaries, bonuses and other compensation in 2006." The union calls the payouts "substantial sums." Mr. Gettelfinger also took considerable time earlier this year to rip high executive compensation during the UAW's bargaining convention, which is a public event meant to lay the groundwork for private labor talks.

On July 23, Mr. Gettelfinger, at a press conference held at Ford headquarters, reminded media that chief executives of Japanese auto makers, which are wildly more profitable than the Big Three, typically make less money then U.S. auto chiefs.