Does Bob Nardelli Work for Cerberus or Chrysler?

The NYT has caught onto something we’ve been discussing over the weekend: Cerberus is apparently trying to use the bridge loan as a convenient means to ditch Chrysler (pity for Cerberus it’s not in Nebraska, where it could just leave Chrysler at a hospital under that state’s safe haven law). Their story includes a detail that adds to questions I’ve been mulling about Bob Nardelli’s role in all this.

Cerberus officials lobbied the White House last week to prevent the private equity firm from being held responsible for the Chrysler loans if the automaker cannot repay them, according to people with knowledge of the talks who declined to be identified because the discussions were private.

But Chrysler executives, who are responsible for the day-to-day operations of the company, were shut out of the discussions, those people said.

[snip]

A Chrysler spokeswoman, Lori McTavish, declined to comment Sunday on whether Mr. Nardelli had played a role in final loan negotiations with the White House.

I started wondering about which company Nardelli works for last night, when I read this line from Chrysler’s beg to Congress.

Mr. Nardelli receives an annual salary of $1 from Chrysler.

This appeared in a document dated December 2: a few weeks after John Tester had asked Nardelli whether he would be willing to take a $1 salary (Nardelli said he would, with no hesitation, but didn’t say he was getting just $1), but before last week’s loan on which that $1 salary was premised. Given the way that Cerberus’ and Chrysler’s interests appear to be diverging wildly, I started wondering who actually employed Nardelli. Has he always been paid $1 by Chrysler, and $11 million by Cerberus, which would make a bit of sense, since he’s basically been pursuing Cerberus’ goal of repackaging Chrysler so it can be sold off (or, alternately, left in a hospital in Nebraska).

But there is reason to believe that Nardelli is being put in the untenable position of representing Chrysler’s interests while Cerberus works to undermine his efforts. Who can forget, for example, the moment when Bob Corker told Nardelli that Cerberus was unwilling to invest any money in Chrysler. That appeared to be news to Nardelli. And, consider the way that Chrysler’s beg largely consisted of proof that bankruptcy would be the most expensive outcome for the US. While Chrysler was making that case, it appears that Cerberus was working their clout on the Hill to push for just the bankruptcy that Chrysler was fighting!

So now this news. Chrysler–whose name is on a $4 billion loan–may not have been in negotiations over the terms of that loan. Bob Nardelli, who is (at least on paper) Chrysler’s CEO, may not have been party to negotiations about that loan. If he was, we’re not allowed to know about it. And others–the UAW, Michigan, taxpayers–are being dumped with the results of negotiation that appears to have been negotiated by a party unwilling to sign its name to the fruits of the negotiation.

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23 replies
  1. plunger says:

    Providing ANY tax payer money to a private gaming enterprise (investment bank) is absurd. The country as a whole should have no interest in whether or not risk-takers who spun the wheel at the Cerberus casino lose all their money. With this management, and these decisions, they certainly deserve to lose. I laughed out loud when they bought half of GMAC. Then it occurred to me that Mr. Sbnow must be up to something sinister, as NOBODY could be that stupid.

    I dropped $150 last week at the blackjack table. Where do I apply to get that money back from the US Taxpayers – who are clearly guilty of allowing me to take that risk?

  2. Akatabi says:

    Interesting potential conflict-of-interest/anti-trust issues out there with Cerberus owning 51% of GMAC (GM has 49% and board members) along with Chrysler. Oh, by the way, they also do mortgages. Too bad it’s all the Union’s fault. I guess anti-trust, like the Geneva Convention, has become “quaint”.

  3. wavpeac says:

    Well, given our terrific weather, our republican style, our treeless, lake-less landscape…those drop off laws are the only way Nebraska can increase it’s population.

    Well, actually, we won’t take Chrysler unless it’s under the age of a year. They changed the law a few weeks ago. Too bad, so sad, you can’t dump the adolescent here anymore.

    This is just truly amazing. I appreciate so much that you are writing about the inner workings (to the best of your ability) of these sleazy corporate criminals. This is the part that is truly stunning to me. It’s not about cars, or homes, or unions. It’s about the world of finance and how they want the tax payers to pay for the fun they have had screwing us over the past 8 years!

    Ugh. I hope we never forget the lessons of this era…(uh, once we are able to uncover them!)

  4. bell says:

    once again i message was cut off and thankfully i don’t post very often! perhaps this site doesn’t like the sideways arrows???

    the rest of my improved message..

    i was mentioning that folks are going to be finding out more about the financial world that has shaped much of what has come to be the ‘usa’ and world by extension and they are not going to be happy at what they find.. whether this translates as an open hostility towards the financial industry, or the federal reserve remains to be seen.. as i said on my last post here a week or so ago… 700 billion for the banking industry with no questions asked by the politicians, co0mpared to 17.4 for the auto industry with 100% scrutiny by these same politicians… the politicians are in the bankers pocket.. wonder how many folks can see that clearly now??

  5. randiego says:

    Cerberus officials lobbied the White House last week to prevent the private equity firm from being held responsible for the Chrysler loans if the automaker cannot repay them, according to people with knowledge of the talks who declined to be identified because the discussions were private.

    But Chrysler executives, who are responsible for the day-to-day operations of the company, were shut out of the discussions, those people said.

    That is just fucking outrageous. Even with my outrage meter pegged at 100/broken.

    In a global sense, I these fuckers knew the fix was in, they could do what they wanted, the taxpayers were always going to be left holding the bag.

  6. earlofhuntingdon says:

    Think Cerberus’ backing was deemed critical by a lender willing to give near-defunct Chrysler a $4 billion loan in a bad market? You betcha.

    Cerberus is exhibiting the classic predator’s behavior. “You give, I take. Government makes it legal; you keep your kneecaps. Everybody’s happy.” Makes you wonder how Capone ever got arrested.

  7. BoxTurtle says:

    Makes you wonder how Capone ever got arrested.

    You can flip off the FBI, but don’t mess with the IRS!

    What happens if Cerberus just walks away at the end of the shutdown? I’m betting that’s their final play. Clearly, they want to separate from Chrysler and it’s really only a question of how much it will cost them. Available data suggests that Cerberus is better off with a bankruptcy, as then the CDS behind the scenes will pay off. They’re certainly not going to take on additional liability.

    My bet: Cerberus board is very well connected, they’ll strike a deal with BushCo before 1/20 that’ll let them walk away with minimum pain. Probably by giving the Govt all their stock as security, then letting the taxpayers take the hit.

    Boxturtle (They won’t much like the deal that Obama will likely offer)

    • emptywheel says:

      That’s the suggestion already. As my lat post on this made clear, they want UAW and their other creditors to take everything, all of Chrysler. That is walking away.

    • readerOfTeaLeaves says:

      Available data suggests that Cerberus is better off with a bankruptcy, as then the CDS behind the scenes will pay off. They’re certainly not going to take on additional liability.

      Sure looks that way; as randi[email protected] said, ‘the fix was in’. But the nature and composition of the fix is still worth delineating, eh?

      First, Cerberus may have been stuck with more toxic mortgage assets than they’d anticipated, so the Wall Street bailout is almost certainly helping with that — unless they ALSO bet against those toxic assets. In which case, the Wall Street bailout is almost certainly helping with thosetoxic assets, also.

      Wow, if anyone has a ‘outrage meter repair kit’ for super-cheap, I need one. Like randiego, mine’s completely busted up.

      And just to note how busted mine is, I can’t even laugh at the dark irony of Paulson having been CEO of Goldman Sachs, which sold plenty of derivatives. So yeah, looks like Nardelli is screwed.

      Black is now white. Up is now down. In is not out. Et cetera.

  8. nomolos says:

    All the greedy motherfucks are digging for every penny of taxpayers money before the gravy train leaves town (Jan20th). Cerberus and GM should have to divest themselves of GMAC and GMAC should become nationalised to get one frigging nickel.

    This outright theft of our money by bush, paulson et al is grand larceny and nothing else. Our Congress is laughable, a bunch of greedy fucks themselves and most of them are just looking to feather their own nests without giving one sweet damn about the poor miserable sods that do the work in this country.

    For someone like me to have gone from retired to unemployed just to keep these bastards in their plush mansions and glittering jewels is beyond sickening. As far as I am concerned Bernie Madoff is my friend, my hero. I hope none of those greedy bastards that gave him money to make ever more money that they could not spend even if they took 24 hours a day trying get any of their money back. I am really pissed. Where the hell is sepuku, where is the guilotine, where is the hangman’s rope?

  9. JohnLopresti says:

    @6 Platte country is special like the overture to the massif of CO, “treeless, lake-less” is resolvable, ask the teens, the way I understood it, you know which farmer has a pond on a dirt road in the rolling topology of the plains between cornfields. It is a little archaic, but people do the same things there as are teens wont.

    • wavpeac says:

      Well, you have me there. Stephen King got the idea for “Children of the Corn” traveling Nebraska’s interstate 80 on his way to the college world series. (or so the story goes.) Honestly, I love big lakes, but I have to tell you that taking a hike down the platte river, that spreads a 1/2 mile wide is pretty amazing. I have a constant craving to be where there are no human beings and a hike down the river can provide that kind of experience. One of our favorite family outings is to hike along the Platte on a hundred degree day. Sand bars, nature, and for some reason it’s so easy to imagine pioneers traveling the river. It is hauntingly beautiful, in it’s own way. And the sandhills are amazing.

      Once in a conversation with a colleague at University of Pennsylvania, she asked “I have a friend raised on the east coast who moved to Nebraska and never came back. Why in the world would anyone ever do that?” When I was in college, I met a girl from New York. I was going to school in MS. I told her I was from Nebraska, just a state above MS. She said “Where is Nebraska?” I remember being totally shocked. How could she get through 8th grade and not know? My goodness I had to memorize every state in the nation, even the little ones up in the northeast.

      Not to hijack the tread off topic here, but we liberal Nebraskans might have a bit of a self esteem issue. Yes, Omaha voted Obama…which was great, but I discovered this blog in a desperate search for a different kind of discussion than the ones I was having in Omaha. Nebraska, like everywhere has it’s strengths and weaknesses.

  10. PierceNichols says:

    Hrm… I think a UAW takeover of Chrsyler might be the only way to save Chrysler. They’d have to try pretty hard to do a worse job of running it than the stooges who have been. Perhaps predicate a bridge loan on that… but make sure that everyone is convinced that there is no third rescue for Chrysler — if the union can’t run it successfully, then no-one’s going to save their bacon.

    Personally, I think the first bailout of Chrysler (back in the 80s) has a good deal to do with the current auto industry problems, because it taught the Detroit 3 that if they got into really serious trouble, good old Uncle Sugar was going to come and bail their sorry asses out. There was therefore no really strong kick in the ass to change their internal cultures in a way that would allow them to match their overseas competition.

    • bmaz says:

      Crikey, you separate Chrysler from Chrysler finance and give the naked Chrysler to the union, you are signing a death warrant for both Chrysler and the union.

      • readerOfTeaLeaves says:

        How, what an enticing result for the CDS holders who bet on Chrysler to go under, eh?

        People seem to equate this bailout to the early 80s bailout; that is leading to widespread misunderstanding of what’s at stake, but also of who stands to win (and lose).

        Back then, no Cerberus, or Goldman Sachs, or other “Private Equity” players were buying CDS ‘insurance’ (from AIG and CIti and others), basically ‘hedging’ their bets against the odds that Chrysler would tank.

        But in this new playground, we can’t even count the number of players waiting in the wings to swoop in and collect those Credit DEFAULT Swaps once Chrysler is declared bankrupt, now can we…?

  11. prostratedragon says:

    Nardelli early in his Home Depot tenure (from June, 2002); even in a small-college football conference, a 195lb offensive guard is likely to be a rather tiring personality.

    Sure enough, Nardelli ending his HD tenure in a manner befitting the classic horror genre (from Jan. 9, 2007):

    According to people familiar with the situation, while store workers were celebrating, the former CEO was already fielding calls from private equity firms interested in his formidable operational talents. The bright side for Nardelli in the world of privately owned corporations, of course, is that he won’t have to deal with any annual meetings or shareholder questions.

    Whereupon Executive Suite Nightmare II: Six Sigma Dawn over Detroit. In a daring move, WSJ breaks genre in the piece, giving us an intricate, postcontemporary multi-character study, with portraits of seemingly familiar characters delineated by the telling historical detail:

    [As he arrived at HD, Nardelli] didn’t have much experience with consumers or the fickle nature of the retail business. He lured to the company several of his former GE colleagues, who also lacked retail experience.

    Mr. Nardelli instituted a military intern program that put Marines at his desk outside his office door, company officials have said. It came to symbolize Mr. Nardelli’s ill-fated tenure at the company. His pugnacious manner helped to drive off many talented and long-tenured executives, while many employees at its 2,000 stores felt demoralized.

    Those who insist that narratives be strictly differentiable might have some trouble with these consecutive paragraphs:

    Mr. Nardelli began to draw shareholders’ ire. His compensation in his six years at the helm — prior to his massive severance payment — exceeded $124 million, excluding certain equity awards. As well, some investors questioned his decision to expand into the low-margin wholesale supply business.

    Mr. Nardelli’s experience at GE is one of the main reasons why Cerberus wanted him. Many of Cerberus advisers and executives are made up of former GE employees. Cerberus is also a big believer in the Six Sigma system and other lean management strategies, according to people familiar with the matter.

    On one hand, all these pictures do suggest that maybe Nardelli is capable in operations —at GE he also had reputedly good working relations with the unions— but poor at seeing the big picture. A person like that could be usefully placed where others want someone around whom they can manuver reliably. Or on the other hand maybe he’s a very good gearshifter of wide-ranging experience.

  12. prostratedragon says:

    OT maybe, or maybe not: over at NakedCapitalism Yves has nice little throw-in amid today’s Links post:

    What the story does mention that the products were marketed heavily overseas, what it does not mention is that the synthetic CDOs were typically against a large group of names, say 100. Payment was triggered if defaults exceeded a certain level. The lists contained names that sounded solid to foreigners, like Citigroup, GM, but were anything but. Some have alleged that the lists were deliberately seeded with famous names that had reasonable odds of failure.

    Note that these synthetic CDOs, like credit default swaps and many other derivatives, are 1) handy tools for gathering and redistributing funds; and 2) responsive to visible and well-defined triggering events, should the designers so choose.

    Joyeux Festivus, all.

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