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Tuesday
Aug072007

Chrysler - A Faster Dinosaur

dino%20chrysler.jpgBy hiring Robert Nardelli, former CEO of Home Depot, the end of Chrysler’s evolutionary cycle is not far off. While head of Home Depot, Nardelli was brutally efficient at cost cutting. But, a downward spiral in stock price, and his obscenely high compensation was his demise. On his exit, he took a severance package of $210 million.
At first, I thought Chrysler had made a very smart decision. They have hired a non-subject matter expert to see the organization and its opportunities through fresh eyes. Brilliant! Indeed, that’s the spin greedy Bob put on it. It’s a great strategy if true. Experts from other industries are often the ones who see the patterns to which industry insiders are blind. They are the ones who ask simple questions everyone else it too smart to consider. Outsiders are the ones who champion innovation and create breakthroughs. The Nardelli hiring could be a great move for the ailing automaker.
But, innovation is not the mission.
NPR reported
, “One of Nardelli's jobs will be to reduce Chrysler's high labor costs.” Economist Mark J. Perry sees trouble ahead for all three U.S. automakers. He cites the UAW as the potential problem.
Hiring Nardelli puts Chrysler between a rock and a hard place. The rock is being squeezed for more blood that isn’t there. The hard place is a market that is losing interest in gas guzzlers. The new focus will be more efficient organization, not more efficient products. Efficiency experts do not fund innovation initiatives. They are more often the ones who eliminate it
A myopic focus on short term profits creates the illusion of success while masking flawed (or missing) long term strategies. Profit is the goal. But, unless balanced to achieve long term competitive advantage, it trades immediate gratification for a viable future.
GM had its shot at a profitable blue ocean future in 1996 with the introduction of the EV1 electric car. They were so far ahead of the curve they could have made Toyota’s current hybrid success insignificant (or impossible). They were poised to revolutionize transportation and could have dominated the industry for a decade before competitors recovered. But, they failed to follow through. According to the producers of, Who killed the Electric Car, they succumbed to pressure from the oil industry.
But, Jeff McIntire-Strasburg, Senior Editor and Content Director at Green Options, believes GM is at it again with the Chevy Volt, part of GM’s E-Flex initiative
GM CEO Rick Waggoner said he is committed to "reinventing the automobile." Has GM learned from its previous failure to own the market? Will this new initiative be enough to save GM from the fate of the other two U.S. automakers?
Chrysler's days are numbered.  But, unlike the dinosaur which survived for millions of years, Chrysler’s extinction will come much quicker. Ironically, both were victims of environmental changes. For the dinosaur, it was an inability to adapt. For Chrysler, it will be an unwillingness to adapt. Or worse, it will be the triumph of short term greed over a need for innovation. The future belongs to innovators like Riva.
 

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Reader Comments (3)

Chrysler, ironically enough, has created an environment that COULD allow it to survive, by going private. It has removed the pressure of quarterly earnings and now has the opportunity to truly innovate and break with the past of the industry.

They could announce a 10 year plan to shift all vehicles to carbon fiber....make a major power plant shift....etc.

But Nardelli just doesn't seem like the guy to transform an industry. While he may surprise us all, it would be a giant leap to assume that is his mission.

Friday, September 28, 2007 | Unregistered CommenterRusty

Feel free to add links to your sources. This is very interesting information. During the Iacocca days, Chrysler was not afraid to take risks. Iacocca once said, "Every business and every product has risks. You can't get around it. Any supervisor worth his salt would rather deal with people who attempt too much than with those who try too little."

Friday, September 28, 2007 | Registered CommenterChas Martin

Chas,

I recently moved from Detroit after 20 years to Raleigh, NC. The automotive industry has a long way to go to find a greater sense of urgency. But they seem to be waking up. Too much self-interest in their employee teams.

The rise of private equity firms operating some of the suppliers (and now Chrysler) will likely drive change change in ways their own executive leaders could not.

Gary

Gary Cokins, SAS
http://blogs.sas.com/cokins

Sunday, October 7, 2007 | Unregistered CommenterGary Cokins

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