The survival plan at Chrysler sounds a lot like those of its peers: roll out new vehicles, rebuild customer confidence, pare labor costs, shed peripheral assets.
Even installing a new chief executive officer from outside the automotive industry – as Chrysler has done this week – is a strategy already employed by Ford Motor Co.
Yet Chrysler's hoped-for recovery hinges on something that sets it apart from its automotive brethren in Detroit and worldwide: private ownership.
Its rivals are traditional corporations, with shares trading on public exchanges. Chrysler, as of Friday, is under the wing of a private investment company, part of a trend toward "private equity" deal-making that's been expanding steadily for five years.
These closely held investor partnerships enjoy less regulation than public corporations, and have no need to curry favor with shareholders. Cerberus Capital, Chrysler's new owner, is banking on the notion that private ownership will allow for more creative strategy, nimbler execution, and freedom from constraints such as the obligation to report earnings each quarter.
But will it work? Suddenly Detroit is a petri dish for discovering whether the trend of private buyouts brings unique managerial benefits to the economy. Chrysler faces challenges that are similar to those of Ford and General Motors. Chrysler will face them from a different standpoint.
"This is not going to be business as usual," says John Wolkonowicz, an auto analyst at Global Insight, a consulting firm in Lexington, Mass. "I think Cerberus wants to blaze a new trail here."
The appointment of Robert Nardelli as Chrysler's new CEO is one sign of the risks Cerberus is willing to take on this new trail. He exited his last post, as head of the retail giant Home Depot, under a cloud of shareholder outrage over his high pay and unresponsive demeanor at annual meetings.
Since the appointment was announced Monday, many analysts questioned whether Mr. Nardelli is well-suited to lead Chrysler's turnaround.
Certainly, many public corporations would have shied away from a leader with a reputation for frosty shareholder relations.
Still, before Home Depot, he was a rising star at General Electric Co. and a contender for the top post there.
"He's a real get-it-done, take-no-prisoners kind of guy," Mr. Wolkonowicz says. With Chrysler in need of a major overhaul, from labor contracts to alliances, "he may be the guy to make this all happen."
Even if Chrysler succeeds, private equity isn't about to supplant the publicly traded corporation as the dominant corporate model. And no single deal will define the future of buyout firms such as Cerberus, headquartered on Park Avenue in New York. But Chrysler may be the most prominent target company in the current acquisition wave, and the transfer of ownership comes at a pivotal time.
Borrowed money, the high-octane fuel for corporate deals, has grown scarce in recent weeks because of the ripple effects of problems in the home-mortgage industry. This has slowed the flow of deals, and forced private equity firms to choose their targets carefully.
The question is whether this marks an end – or just a pause – in private ownership's persistent rise. Chrysler's path will help answer that question.
In a press briefing Monday, Nardelli talked of pushing forward with Chrysler's current restructuring plan, which calls for 13,000 job cuts. But many analysts expect that this is a prelude to more sweeping changes. And in all this, Cerberus is expecting Chrysler to capitalize on its flexible structure as a private firm.
"We'll move forward with speed and a renewed focus on meeting the needs of customers," Nardelli pledged.
Analysts expect to see this agility on several fronts:
•Moving quickly to forge global alliances. This could help Chrysler, with a largely American sales base, to tap faster-growing markets overseas, as Ford and GM are doing. And it could shave development costs for new cars, by pooling technology efforts. The company could build on existing ties with South Korea's Hyundai and China's Chery, as well as possibly forming a partnership in Russia.
•Recasting its product lineup. "It has to get its product mojo back," says Michelle Krebs, senior editor of Edmund's AutoObserver.com in Detroit. Cerberus will probably help Nardelli recruit new talent from outside, and the CEO will focus on unleashing creative talent within the company.
•Revamping operations to cut costs. This is where some analysts expect Nardelli to shine – but again, he'll need help. Better relations with suppliers, auto dealerships, and a new contract this year with the unionized assembly workforce are all priorities.
•A veil of silence. Even as Nardelli pushes for rapid progress, the firm won't have to give out earnings numbers. Managers can make decisions with a payback time of several years. As with most private-equity deals, this one is expected to eventually result in Cerberus cashing in by taking Chrysler public again with a stock offering.
Some academic research suggests that private-equity deals can achieve higher rates of return than traditional corporations – at least during relatively short spans of ownership.
A case like Chrysler can be a phenomenal turnaround or a colossal failure.
"They really have product-line problems," says Peter Morici, an economist at the University of Maryland who studies the industry. Moreover, he says that US carmakers, as a group, are losing money on every vehicle sold in the country. "It's going to take more than a transformational labor contract to turn this company around."