Robert Nardelli, the consummate bean counter, has just stuck it to Lido “Lee” Iacocca, the greatest automotive genius of the past 50 years - a builder of cars. Nardelli has cut off Lee’s pension and life time car agreement. 1,250 other retired Chrysler execs are also losing their pensions, as well as being ordered to return their complimentary vehicles or buy them.
Why Chrysler wants more cars back when they can’t sell the ones they have is a mystery?
Nardelli is doing it because he says bankruptcy allows him to as they build a new Chrysler owned by the government, unions, and Fiat. Contracts and loyalty mean nothingto the bean counter. The secured creditors were also stiffed in the bankruptcy.
Lee Iacocca saved Chrysler from bankruptcy 30 years ago. He gave America the K-cars and the Minivan at Chrysler, and the Mustang earlier at Ford. He also revived Mercury at Ford. Nardelli has given us bankruptcy and bailouts.
Nardelli was appointed chair of Chrysler on August 5, 2007, and in roughly a year and a half drove it in overdrive to bankruptcy
Lee Iacocca chaired the successful Statue of Liberty/Ellis Island Foundation, celebrating the heritage of America.
Nardelli was passed over at GE and then canned at Home Depot because of extreme arrogance. He even treated the shareholders with contempt. He also took out over $500 million from Home Depot. He didn’t give that back.
So as the ultimate bean counter departs Chrysler, he has done yet more damage in his final days.
His vision of saving Chrysler was to cut costs by substantially reducing sales. He was successful by half. He cut fleet sales, leases, product lines, and even future product development because his spreadsheet said he could.
Bean counters look to numbers, but fail to understand people. Loyalty is an alien concept. They fail to understand that any enterprise is dependent on its people. Their myopia is numbers.
How you make money by reducing volume when volume is the key to overcoming fixed overhead escapes me?
The hundreds of thousands of vehicles cut from production had generated net marginal revenue for the company. For example, even if the Dodge Magnum only sold 75,000 units a year, that 75,000 was on the same assembly line as the Chrysler 300, shared the identical platform and components, and hence increased productivity. So too with the Chrysler Pacifica assembled on the minivan lines.
But having shrunk Chrysler into bankruptcy, he still believes he can sell more with less. Bean counters don’t learn from mistakes; they repeat them because the spreadsheet says they can.
Hence, a few weeks ago Chrysler summarily terminated 769 dealers, 25% of its total. Unlike GM’s termination, Chrysler said it would not have to honor its contractual obligations to the dealers. Normally, when a dealership closes, the factory buys back its new car inventory and special tools. Not Chrysler – because bankruptcy lets it.
Let’s look at some of the terminated dealerships.
John and Horace Dodge founded Dodge Brothers in 1914. Dealer number three was George T. Tator of South Salem, New York. Owned for three generations by the same family, through depression and war, boom and bust, great product and bad, the dealership prospered. But it could not survive bankrupt Bob.
Chrysler asked its dealer s a few months ago to buy extra inventory to help it out. One dealer stepped up and bought $500,000 in Chrysler product. Now he has to eat it because Chrysler cut him off cold turkey.
Union Dodge in Garden Grove was founded by a Korean immigrant pursuing the American Dream. Chrysler wanted to consolidate its remaining brands into single outlets. Thus his son acquired a Chrysler and Jeep franchise two years ago to become of only four consolidated Chrysler dealers in Orange County. Now he has $5 million in Chrysler vehicles to liquidate.
Chrysler has a funny way of selling vehicles in California. 38 million residents, and it just cut 32 of its 142 dealers in the state. Orange County with 3 million people is down to 6 franchises. Toyota and Ford (not including Lincoln Mercury) have 11, Honda 9, Lexus 4, Mercedes 4 and BMW 3. One of the Toyota dealers outsells all the Chrysler dealers combined. BMW and Mercedes both outsell Chrysler in Orange County. Less is not going to be more for Chrysler in the OC. Indeed, roughly 5 years ago a Dodge dealer, selling about 200 new vehicles monthly, acquired a Chrysler and Jeep franchise from a retiring dealer a few miles away. Monthly sales remained 200 for the combined Chrysler, Dodge, Jeep dealership.
Chrysler terminated its Dodge and Jeep dealer in El Centro, California. The nearest Chrysler dealer is 60 miles away in Yuma, Arizona. The Ford, Honda, Hyundai, and Toyota dealers will continue to sell cars in El Centro. Similarly, Chrysler terminated its two dealerships in Stillwater, Oklahoma. The nearest Chrysler dealer is 50 miles away.
Just because you can do it, just because the spreadsheet says you can, just because an accommodating bankruptcy signs off on it, doesn’t mean it’s the right thing to do.
We are all paying for the bean counter.