This one is driving me nuts. I’ve heard this from three sources now. Good sources. Independent sources. Sources that will never talk to me again if I name them. Even discounting their tips, the story makes perfect sense. It’s common knowledge that ex-Home Depot Chairman Bob Nardelli actively campaigned for Chrysler’s top job. Up until the weekend of August 2, 2007, there wasn’t a single journalist who didn’t think Wolfgang Bernhard was going to get the job, with Chrysler veteran (and author of the Daimler-commissioned turnaround plan) Tom LaSorda as his underling. And then… Bob Nardelli. Who? Nardelli was a complete industry outsider (he owned a Plymouth Prowler for God’s sake). Why the sudden change of plan? Could it be that Nardelli put his own money on the line? Motive: resurrection of his tarnished rep. Means: the exec drifted out of Home Depot on a $210m golden parachute. Opportunity: Cerberus considered industry players inherently suspicious. And what do we make of Nardelli’s testimony to Congress that he doesn’t draw a penny in salary? OK, so I called Chrysler for confirmation. Within ten minutes Nardelli’s personal PR person returned my ping and categorically denied this report. So are you saying that Mr. Nardelli didn’t put ANY money into Chrysler when Cerberus bought it from Daimler? Correct. So now you know. Or don’t.
So now we know that the captain of the ship is a wise investor himself. Chrysler’s future sure looks promising!
Frankly, if its true I’ve got a lot more respect for Nardelli (investment judgment aside) than I do for Rick Wagoner. Nardelli put his money where his mouth is, while Wagoner collected $14 million for flying GM into a smoking crater.
“A fool and his money are soon parted.” – Thomas Tusser
The Iceberg had already been struck by the time Captain Bob took the helm of Chrysler.
With a proper Ch11 re-org they could become a decent nice player with their stronger products. Just make the light trucks and mini-vans and rent the channel to those who can make competent cars. Harley came back from similar circumstances to become the immensely profitable organization they are today.
Means: the exec drifted out of Home Depot on a $210m golden parachute.
Isn’t it funny that some “top execs” are so addicted to power that they’d rather go back on running a large corporation and making fools of themselves as opposed to chilling on a beach or getting involved in a charity?
I mean, they don’t financially need to work with that much money in the bank.
RedStapler,
Not to pick, but have you seen HD’s latest earnings report? “immensely profitable” is more than a stretch. They are still profitable, but their cash flow burn and debt is troubling.
Tex
Wow… This finally makes some sense! In a nonsensicle, bizzaro world, sort of way.
I guess if he wanted to bleed another company dry he’d have to at least put some of own money up front.
Funny that he would pay more for the CEO position than what the company is actually worth…
Wow… I think the says more about Cerberus than Nardelli. Why would a company sell the CEO slot instead of getting the best talent they can afford?
I guess they are getting what they pay for.
On the other hand, a business working like is not unheard of. Top tier restaurants don’t pay their waiters. Professional waiters pay them for the privilege of working there.
This rumor does not sound right to me. I cannot think of any example in any company in any industry where a CEO has bought his spot.
But like all good rumors, it does make some sense, and might even be true. Investors always like top management to have skin in the game. In many startups, an investor will insist that a CEO who has money put some of it into an offering. It is not inconceivable that Cerberus would do something like that.
But also not likely, in my opinion. And the way it has worked out, if Cerberus did do that, you can bet they won’t do it again.
This just proves that the GE guys are not that smart. Whenever I hear how great they are, Six Sigma, meeting metrics, blah f-ing blah I want to puke.
” I cannot think of any example in any company in any industry where a CEO has bought his spot.”
Any number of partnerships, in anything from real estate, law firms, to advertising and marketing agencies, etc. the guy who kicks in the most capital is the CEO. Take for example, a group of guys that gets together to develop a piece of industrial land,. The guy who kicks in the most capital owns the largets share and is therefore the boss.
Even in instances where the people who are putting up the money don’t want to manage the day to day operations, they often want the managing partner to have some skin in the game – and he does this by contrinbuting his own capital.
From what I know of private equity – they will often take a company private and hire a successful CEO to run it. However, if that CEO has made $100 million running company “X” they will want him to contribute a significant portion of his personal wealth to the deal, so his incentives and the incentives of the private equity firm, are in line when running the new business.
So let assume that he does not have his skin in the game. Anyway, why does he looks like he just took large one for the team?
If someone paid me $210M to not work, I’d damn well not work. Everyday. In my oceanside villa in Costa Rica.
If someone paid me $210M to not work, I’d damn well not work.
And now you understand why CEO pay gets to be so high. You’re not recruiting a CEO from among the entry level managment trainees making 50k with a baby on the way. You are recruting from among the Marketing VPs, VPs of Sales, CFOs, COOs who already have a high paying job and plenty of money squireled away.
Whatever legacy Nardelli may of had has been destroyed by this stays at Home Depot and now Chrysler.
This rumor sounds ridiculous. But even if it’s true, how can you fault a man who pays big bucks to DO his job? Doesn’t that show his motivation and drive more than anything?
Here is a wild ass opinion set off by this wild ass rumor. Even is this guy did not pay millions to get his job, the sums of money involved are still stupendous.
There was a term I grew up with in the ’60’s. “Obscene wealth”. I am increasingly convinced the ultra ultra wealthy individuals and organizations are harmful to We The People. They are parasitically siphoning all the wealth off to the top, and running the rest of us into the ground.
Un throttled capitalists are no less immoral or criminal than a Mafia, they are just legal.
It sounds like what’s being claimed is that he invested $50m in Cerebus in exchange for the CEO position, is that it? If so, I’m sure he’s expecting that money to come back to him one way or the other, because I can’t imagine he’d cut them a $50m check with no strings attached just so he could take over a failing company.
The explanation at the time was that Nardelli was more pessimistic (realistic in Cerberus’ view) about the industry, so they went with him. To Cerberus, this wasn’t about cars; it was about $. So why hire a car guy when you’ve got a hard ass business guy who’s worked for Welch and some top notch people at GE and knew how it’s done in a place that made it work in a wide variety of businesses?
Hiring a car guy would have made sense if Cerberus wanted to build the company over the long term, but that isn’t their style. Cerberus knew full well that Daimler valued the company at zero, so they (Cerberus) would have to have been nuts or thought they were much smarter than Daimler, which they knew they weren’t, to think otherwise. The problem is that it collapsed on them before their usual pump and dump game had time to play out.
It’s an ego thing: I knew someone who was used to being a corporate head who had a very hard time with retirement. No power, no company to manage/elevate/save, no subservient staff, no perks. Just golf, grandkids, and a sense of bewilderment.
“Dis iss note aboot moo-nee. DIS ISS ABOOT POW-WAH”
-Screwface
Marked For Death
Thank-you.
Surprised to read this, but only cause I hadn’t thought about it before.
I doubt he paid to get hired as in, it was an expense to him and Cerebus just gets to keep it, like some finders fee.
If he put money in it was that he had to buy equity to get hired. The idea is he invests money as well as effort.
Many large companies require executives to invest in the company.
In many cases this means “Don’t cash out those options we piled on you too quickly” but the idea is to get them to try harder, their own $ is at stake. When the $ at stake is far greater than the daily salary it does motivate.
If my memory serves me, Wolfgang Bernhard was reported to have walked away from the job offer after having a good look at the state of Chrysler.
My guess is that this is total BS. I’m sure Nardelli invested in Chrysler after being hired but I doubt he was so desperate as to pay for a job or that Cerberus would hire someone that would do such a thing.
I’d wager that Nardelli got the job because he was the only exec with big company experience that was willing to take the post.
CEO’s who are willing to walk away from that type of position after a profitable (for them at least)run are few in number. One former CEO left during the peak of our stock price and never looked back. He literally rode off into the sunset on his Harley. But far more are like the one at a different company who was on his 4th try at CEO. He already had three of those massive Nardelli parachutes in his pocket and he didn’t have any desire to stop.
I trust that Nardellii/Cerberus will triple their “investment”. This was all part of the plan. Brilliant.
If someone paid me $210M to not work, I’d damn well not work. Everyday. In my oceanside villa in Costa Rica..
My late Uncle Norman was a mortgage banker (this was before all the subprime nonsense) and while he wasn’t fabulously wealthy he was worth about 8 figures when he died (that was after my aunt got half in their divorce). He could have driven any car he wanted and lived in a large home but he drove a late model Oldsmobile and lived in a one bedroom apartment. At his funeral, one of my cousins said that his dad treated money as a tool to help people start businesses.
If someone paid me $210 million for anything, I’d be getting out my list of cool business ideas I’ve had but no capital to fund them.
I mean, I can be as lazy and indolent as the next guy, but if I was independently wealthy I’d still find something productive to do. Besides, sitting on a beach has got to be the most boring thing in the world.
Lie and fry? Nah, fire one up and do something interesting.
I am increasingly convinced the ultra ultra wealthy individuals and organizations are harmful to We The People. They are parasitically siphoning all the wealth off to the top, and running the rest of us into the ground.
Parasites? I dunno about that. Going around town I see all sorts of philanthropies funded by very wealthy individuals.
So tell us, how have you been run into the ground? Got a microwave and a color tv? You obviously have some kind of internet service. Got a cellphone? How about an iPod? Ever go to Starbucks? Got an HDTV?
Upper middle class folks from the 1970s would look at your luxuries and be amazed that you claim to be deprived.
Nardelli is a terrorist. Just print out the pic here, draw a beard and a head dress. See? We found Bin Ladin! Or at least the Saudi Crown Prince.