Gabriel’s scarcity rent – it’s management stupid!

Cerberus gets his prize with Chrysler (A new chance to see private equity management)

29 October, 2007 at 2:24 pm 2 comments

Daimler no more. Finally Cerberus got their way. (Remember the post Cerberus Capital Management: another style for private equity). One icon buys another. In those five months, thousands of hours spent at the negotiating table as well as more than $7,400 million.

So it seems the time has come for Cerberus to get their chance to manage Crysler in their own way. Chrysler needs it badly. Chrysler needs to retake the profitability path and that will mean some additional leaning or, probably, even severe downsizing.

The ones to decide will be the new management team: 150 professionals brought by Cerberus. Headed by Robert L. Nardelli.

Ex-chief of Home-Depot, his eyes should add a new and fresh perspective to the Chrysler problem. Star in GE energy division, he lost the race to replace Jack  Welch. Then he was controversial at Home Depot because his earnings and his conflicts with shareholders that finally ousted him.

Now we will be able to see the difference in management between a long established and experienced firm such as Daimler Benz and Cerberus’ own style. In these days of increased capital costs it’s very important for the market to perceive the value added by private-equity management. That value can be proved in Cerberus in the forthcoming months… or not.

There are many unanswered questions. This time, they swear, there are no plans to chop the company to pieces and sell them, but some days ago the unions  threatened for a strike avoided at the last minute. Cerberus had also sworn to keep the previous managers but promises are just that… promises. Now they say it is reasonable to change management when facing new challenges. And the auto industry is amid turbulences right now, as Toyota, Ford or Honda can witness too.

Next questions only time will answer: can Cerberus provide the right management for Chrysler? Is Nardelli the right man for the job?

Entry filed under: b-school, Business, Management, MBA, Private Equity. Tags: .