Could it be that Bob Nardelli is Right?

Could it be that Bob Nardelli is Right?
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The hot question is what’s going on with “Project D?”

The man who was heading Chrysler’s most important product development project has quit the company – only two months after getting promoted to the job.

Chrysler claims there’s no acrimony, but that’s neither the version reported by the Wall Street Journal nor what the circumstantial evidence suggests:

The Journal says that the departure of Michael Donoughe, who held the position of vice-president and was in charge of Project D, which is the development of a new mid-size platform to replace the current Dodge Avenger and Chrysler Sebring, was the result of conflicts with top-level Chrysler management.

At Chrysler, that phrase is a euphemism for Bob Nardelli.

(more after the jump)

While other executives have left Chrysler since the purchase by Cerberus Capital in circumstances suggesting that they’d clashed with the new management at the company, the departure of Donoughe is particularly interesting. First, Donoughe is regarded as one of the rising stars of the domestic auto industry. Second, Project D has been considered by many to be critical to the future of the company. The underlying theory has been that mid-size auto market is the most competitive, and Chrysler needs a winner in that market slot if it’s to make big money.

Chrysler, however, said merely that "Chrysler denies that the departure had anything to do with a clash with management." Beyond that, however, the company refused comment.

That comment, however, deserves to be read twice. Notice that the company is not denying that there was “a clash with management.” It merely denied that the departure had anything to do with such a clash.

So, in a sense, Chrysler’s denial is actually more a confirmation of the Journal story.

So, what’s the real story?

Could it be that Bob Nardelli is doing something right?

Yes, much as it chagrins me to admit it, reading between the lines of the Journal story leaves the inescapable belief that Nardelli has nailed it. I’ve bad mouthed him for his failed tenure at Home Depot - one which was entirely his fault and a function of his narrow-minded arrogance.

But, this time, he might actually have it right. Maybe he’s learned from his mistakes. Maybe this is like the broken clock, right twice a day.

But,

Project D is a bad idea. Awful, in fact.

Think, for just a moment, about the wisdom of “Project D.”

You’re a car company that is so undercapitalized that your new boss referred to you as “operationally bankrupt” two months ago. You’re in a down market, facing a recession. You’ve got no foreign operations to subsidize your domestic losses and your current product line is obsolete – except for the new models you just introduced into the slowest-selling segments of the auto market.

Should you be investing copious quantities of money (for that’s what it’s going to take) into developing a competitor to the Toyota Camry, Honda Accord, and Chevy Malibu?

Despite the fact that Toyota’s reputation has tanked, the new Camry has been given sub-par ratings by both consumer magazines and the enthusiast press, and the new Accord’s reviews have been even worse, the raves that have greeted the new Malibu are not expected to translate into top-tier sales for that car. That’s despite a $150 million a year advertising campaign - 1/20th of the entire GM advertising budget – behind that one car. With all that, it’s expected that Chevy will trail Toyota and Honda in that segment for the foreseeable future.

For Chrysler to attempt to compete in that market would be the auto industry equivalent of Pickett’s charge.

For those who are not students of history, Pickett’s charge – so named because of the General who lead the assault – is regarded by many as the defining moment of the defining battle of the Civil War. Confederate General Robert E. Lee ordered a frontal infantry assault on the entrenched positions of Union commander Meade. The result was slaughter of the Confederate forces, a defeat from which the rebels never recovered.

It has, since, become a symbol for stubbornly pursing a failed strategy despite overwhelming odds against success, merely because it’s something to do rather than losing.

Which would pretty much define the management style at Chrysler for a number of years, those with Daimler management included.

So, what if the current headlines mean that “Project D” is actually dead?

That would mean that Chrysler isn’t going to waste money on a market in which they cannot win.

That would be a start.

What do you think?
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