I was a little surprised. You need to remember that Home Depot just paid him $210 million to LEAVE. Who'd hire somebody like that? How do you motivate a man who just got paid $210 million to quit his old job?
Meaning?
DAS
For direct replies replace nospam with schmetterling
Um, it's not a question of motivating him with compensation.
You have to understand what Cerberus is up to. They bought Chrysler with the idea that they will get it profitable then do an IPO and make a killing on all the investors that buy the stock.
The problem though is the stock market has got a lot more fragile than it was 6 months ago. Cerberus is afraid that if they don't get Chrysler profitable soon then even if they eventually do get it profitable, they would lose money on making it go public because they are thinking the stock market is going to go down further.
So, how do they make it profitable quick? Simple. They squeeze all the suppliers, they threaten the dealers with losing their franchises if they don't get sales up, they cut corners on manufacturing, they cut labor by laying off people. They don't really care if what they do deals mortal blows to the company. To do all this they have to hire someone who is just nasty as all get out, someone who LIKES being the number one asshole. They want the labor unions facing a CEO who the union thinks might actually go out and do something insanely stupid, like close an entire plant down if a few troublemakers in it manage to vote down a contract. That's Nardelli in a nutshell.
Ted
Well, maybe so, but if he can save them 300 million dollars, and they have to pay him 500 million dollars, they're going to be way in the hole. If he can save them $500 million, then they basically haven't done anything.
Realistically, there are lots of talented people who would love to run Chrysler for 2 or 3 million bucks, and would do it well. Carlos Goshn is CEO of two car companies now and he makes about $3 million.
Look, I'd be willing to run Chrysler for a month. I wouldn't be able to do *much* damage in that short time, then they can fire me and pay me the same for that month as Nardelli got for each month he was at HD.
Perce
I've always thought that. Any institution would find it hard to keep me on the job for $10 million a month. After a month I'd be so gone they'd never find me. It just goes to show that American CEO's are all insane, or else I am.
Why are they insane, when they reap such unjustified rewards. I'd say they are very smart and are taking the company boards to the cleaners.
No, they are taking the company stockholders to the cleaners... I'm increasingly surprised that there are not more stockholder revolts at annual meetings.
I suppose the only reason why there are not more stockholder revolts is that the majority of shares in many companies are owned by mutual funds or pension trusts.
Doug
Correct, but after the board approves of the stealing.
True and many individual shareholders wouldn't find it an effective use of their time and money to go to the shareholder meetings launching a protest that would be ignored anyway.
Unfortunately, very few of the stockholders these days care who the hell is running the company and WTF they are doing, as long as the stock price keeps going up. And equally unfortunately, stock prices on many companies these days have very little relation to the actual health of the company.
Since Nardelli is known as a ball-breaker they probably think the market will assume he will gut the company to make the profits look high, and the stock price will rise in anticipation.
Then a couple years from now when the current holders have all sold their stock holdings and made a buck, the stockholders then will figure out the company was gutted and the stock price will plummet. That's the time for shareholder protests and the like. Of course it will be too late then.
Ted
Of course, Chrysler has no stockholders any more, just investors in a private company. That means we may never hear again how Chrysler is doing financially, as they are under no obligation to make anything public.
Well, if you say so, I must be the insane one. I can tell you if I had 100 million dollars, you wouldn't catch me going to work every day trying to get a 2nd 100 million. They have to set an alarm clock just like I do.
The investors in Chrysler bought it to turn it around and sell it. That is how investment houses like them operate. It is on a large scale fundamentally the same thing as when an individual buys a run down home and fixes it up for a quick sale. They call it "flipping houses" in the trade. This is simply "flipping a company"
If the Dow hadn't crashed they would be planning the IPO in 2 years I'd bet. But I suspect that right now they are going to hold on to Chrysler for a number of years until the stock market improves. That is a shame as Chrysler will not have any kind of visionary leader until the bankers are gone and out of the picture, and we probably will see a series of boring prefunctory cars from them for a while.
Ted
The problem is that in order to get the job that pays 100 million you have to be the type that would NEVER be satisfied just sitting back and living off the money. It's one of those cruel jokes the Universe plays on us poor humans. The poor people like us aren't content unless we had the 100 million and the rich people who have the 100 million aren't content unless they have 200 million.
Ted
I've been wandering around looking at Cerberus, and while I can find a lot of companies they've bought, I can't find any they've sold. While they seem to operate by raising profits through cost-cutting and selling unprofitable assets, they seem to be more long-term than just flipping companies (if you've found a source that points to Cerberus as flipping companies, rather than a generic statement that it's how private investment firms operate, I'd be happy to hear it. Well, not happy, since I'd like Chrysler to succeed, but you know what I mean).
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That's no explanation. Wouldn't pension trusts and mutual fund companies be well organized, and able to control a comany effectively?
I can tell you that at my company, our big investors can easily get what they want when they stand their ground. If the board wants to do something stupid, the board gets a talking to from these people, and the board has to give in. I've seen them do it. Yet these "accountability sessions" don't seem to extend to the issue of executive giveaways.
It'll be fun to watch what they do. Product-wise, I am concerned. They won't be taking Mercedes old platforms, and I don't suppose there's much chance of Nardelli being a product man. Maybe they'll fool me.
There's a good article in Fortune magazine about Cerberus, on-line here:
Yes and no. They tend to be run by analysts who simply look at the bottom line. Plus they may well have a certain sympathetic relationship to executives who wine and dine them. The fund managers own huge bonuses often depend more on marketing to new fund shareholders than minimizing cost for their current fund shareholders. The mutual funds with 7.5% loads are testaments to that.
Sure that's certainly true for the large investors like Kerkorian. However, I'm sure that investors like him, used to making many millions per year, are also sympathetic to multimillion dollar executive bonuses.
Doug
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