Two for the road: GM, Chrysler CEOs

A pair of very distinct leaders are charged with saving the U.S. auto industry.

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By Alex Taylor III, senior editor

Bob Nardelli, who's led Chrysler for the past year and a half
Fritz Henderson, GM's incoming CEO
Should Obama let GM and Chrysler go bankrupt?
  • Yes, they’ve been given enough chances
  • No, they’re too big to fail
  • Give them one more shot and then think about it

NEW YORK (Fortune) -- Now that Rick Wagoner is out as chairman and CEO of General Motors, two different leaders are at the wheel of the nation's two troubled auto companies.

Both are known for wielding a sharp pencil. After that, their management skills and backgrounds diverge.

A manager's manager

At Chrysler, Bob Nardelli has been given a vote of confidence by the Treasury's auto task force by being allowed to remain in his job. Having run Chrysler for only the last 18 months, Nardelli has the great advantage of not being associated with Chrysler's past problems.

Well-versed in executive management after his stints at General Electric (GE, Fortune 500) and Home Depot (HD, Fortune 500), Nardelli has moved aggressively at Chrysler, ordering up hundreds of improvements in the vehicle lineup and taking out hundreds of thousands of units from production - as well as thousands of workers from the automaker's payroll.

But in its viability report on Chrysler, the auto task force disagreed with Nardelli's repeated assertion that the automaker could survive as an independent company. The report took particular note of Chrysler's weak passenger car lineup and anemic pipeline, and concluded that company does not have enough new models, enough small cars, or enough hybrids and electrics to successfully compete in the future and meet regulatory requirements.

"The combination of a fundamentally disadvantaged operating structure and a limited set of desirable products make standalone viability for the business highly challenging," the report said.

Nardelli had a controversial tenure at Home Depot where profits, service and its stock price all fell as he took home a huge paycheck. He would like nothing better than to make a good name for himself at Chrysler - and prove to the world that he would have been the right man to succeed Jack Welch at GE

But Nardelli will have to sheath his sharp pencil at times and listen more closely to his company's car guys about what Chrysler needs to do to remain viable. Otherwise, his repeated cost cutting will leave the automaker as nothing more than a shell - which can hardly improve its chances of a merger with Fiat that it needs to survive.

No time for niceties

Over at GM, Fritz Henderson's resume looks a lot like Wagoner's: Harvard Business School, important assignments overseas, a stint as chief financial officer. He had been an able lieutenant, mucking through the details of the automaker's turnaround plan while Wagoner articulated the public goals.

Yet Henderson's management style is quite a bit different. Whereas Wagoner liked to seek consensus and persuade rather than command, Henderson is more impatient and more willing to come to his own conclusions, and then act unilaterally.

He's also less likely to be considerate of others' feelings and to tolerate poor performance. Wagoner's eight-year tenure was marked by extraordinary stability in top management; Henderson's will likely be less so.

Increased urgency and intensity is what GM (GM, Fortune 500) needs right now. The Obama Administration's auto task force analysis reiterates the same issues the company's critics have been complaining about for years: too many brands, too many nameplates and too many dealers.

It also highlights a persistent problem in the mindset at GM: congenital optimism. The government report points out that GM's projections for sales, profits, and market share are unrealistically rosy.

Even GM's claims for future product lack credibility. The report points out that the range-extended electric 2011 Chevy Volt, on which GM has lavished so much promotion "is currently projected to be much more expensive than its gasoline-fueled peers," and "will likely need substantial reductions in manufacturing cost in order to become commercially viable.

With GM's future so clearly on the line, Henderson will have a mandate to dampen the rosy outlook and bring a welcome note of realism to the still-insular GM culture.

One of his first big tests will be getting the United Auto Workers and the company's bondholders to come to the table. The union won't move until it sees how much of a sacrifice the bondholders will make, and the bondholders don't want to move until they are convinced that GM will be viable for the long term.

With his background in finance, Henderson should do fine with the bondholders. But he'll have to hold his natural impatience in check to win the UAW over. To top of page

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