Influencers with Andy Serwer: Bob Nardelli

In this episode of Influencers, Andy is joined by Bob Nardelli, former CEO of Chrysler and Home Depot, as they discuss the U.S. economy, the biggest challenges facing today's CEOs, and why Nardelli says we're already in a recession.

Video Transcript

ANDY SERWER: In this episode of "Influencers," CEO of XLR8 and former CEO of Chrysler and Home Depot, Bob Nardelli.

BOB NARDELLI: I don't think I've ever seen a more challenging time for the CEOs today. There's a million things we could do, Andy, if we were serious about trying to get this economy stitched back together in a meaningful way. The broad range of constituents that a CEO has to try to satisfy, you know, I've always thought about if you try to satisfy everyone like that, you're really satisfying no one.

[MUSIC PLAYING]

ANDY SERWER: Hello, everyone, and welcome to "Influencers." I'm Andy Serwer. And welcome to our guest, Robert Nardelli, CEO of XLR8, former CEO of Chrysler, former CEO of Home Depot, long-standing GE executive, among other things. Bob, nice to see you. Welcome.

BOB NARDELLI: Thanks, Andy. It's really great to be with you. I look forward to our discussion.

ANDY SERWER: So let's jump right in. Love to get your take on the current economy. So many different facets to try to wrap your brain around here. Do you think we're in for a recession, for instance?

BOB NARDELLI: Yeah, let me back up for a moment, Andy. I've been at this for 51 years now. And I don't think I've ever seen a more challenging time for the CEOs today. You know, I've been through the situation in '07, '08, and '09, where we had the financial meltdown. But we're able to focus on that issue.

Today, we have a plethora of issues that a CEO has to try to address. And certainly, recession is one of them. But we have inflation. We have supply chain. We have price increases. The list goes on. I mean, the broad range of constituents that a CEO has to try to satisfy, you know, I've always thought about if you try to satisfy everyone like that, you really satisfy no one.

But to your question about a recession, I've said for months now that we are in a recession. We've had nine consecutive months of inflation. And it was a few weeks ago, I was on air, and I said-- we were at 8.6% that time, and I said we're well on our way to 10%. And it was-- the show was a little taken back by that comment. They said, are you sure 10%? I said, yep, 10%.

And I think we're well into 10%, Andy, and beyond. When you consider shrinkflation and hidden inflation, it is well into 10% or above. And I think it's impacting every individual in our country. And it really puts a tremendous hardship on businesses, big and small, and individual consumers, entrepreneurs, family offices. I don't think there's anyone that isn't being touched by the current environment.

And what's most stressful to me and the CEOs I talk to-- Fortune 500, mid-cap, small cap entrepreneurs-- is they really don't see us doing anything positive to try and remediate this situation. And we can pick any subject you'd like to pursue, and I can give you a take on at least what I'm hearing.

And look, I have the benefit of boots on the ground. I mean, I'm very actively involved in businesses, in advisory, et cetera, et cetera. So I can bring a realistic view. A lot of people are optimistic. Some are pessimistic. I'd like to think of myself as realistic. Because only then, Andy, can you put in place an appropriate set of initiatives to try and fix it.

ANDY SERWER: Right. A lot to jump off of there. And let's talk about this recession point. Point well taken about inflation. I mean, it is a problem. The Fed's going to be-- has acted, will continue to act, no doubt. But on the other hand, Bob, when you're out there, when you're in the airports, when you're at the resorts, when you're traveling around in the shopping malls, that doesn't feel like a recession now, does it?

BOB NARDELLI: Well, it depends. There's still a demand on the consumer part. So you would say, well, so it's not a typical recession that we're in. But people are still going to travel. When you walk down a grocery aisle and you look at the price on there, you could see almost everything has gone up, right, Andy? Any core food product, what have you, has gone up.

But what's happening now is you look at the price on the aisle, and let's say it's $5, you say, well, it hasn't gone up since last week. But what has happened is about a third less of the volume, so less ounces, less pieces, et cetera. So it's a deceptive correct number, if I can say it that way.

And the same thing on what I'll call hidden inflation. I bet if you solicited your viewing audience and said send me an example of where you've experienced a personal price increase in a service provided to you at your home, whether it's a gardening, whether it's a utilities, whether it's phone service, et cetera, I guarantee you they're going to say they have felt it.

So it's not the typical recession that you would think we've experienced before. Look, I went back 40 years ago, when they're comparing it to that. My mortgage was 18%. I felt it. I mean, it was a real inflation. I think there's still some pent-up demands here where people are traveling, to your point. I mean, they're still-- you look at the airlines, and they're inundated with volume. They're just having a tough time servicing it because of employees, because of fuel prices, because of people on the tarmac, baggage handler-- just go down the list. So it is a very different type of recession.

But if you look at something like autos right now, used car prices are up. Electric vehicle prices are up 44%. Utilities used to recharge that battery are up 40%. So I don't know-- people are still saying, well, what about the volume? Take one of the largest beverage companies. They reported a 5% revenue increase, right? You say, well, things are good.

Well, then, if you ask the second question, which people don't ask, how did you get that? Well, 12% was on price. The price was up 12%. Mix was up, and it wasn't really on pure volume. So we really have to ask the tough second question. Is it price, is it mix, or is it volume? And that's where you get to the real truth here about where we are, Andy.

ANDY SERWER: You've expressed some pretty strong views on the Fed hiking rates to ward off inflation. Why do you think it will have such a negative effect on consumers who maybe are still feeling good, a little bit? And what do you think the Fed should be doing, Bob?

BOB NARDELLI: Well, first of all, the Fed is the only part of the administration that's doing anything positively. There's only proof positively to try and dampen inflation. But again, having spent a lot of time at Home Depot, I have some of these old habits. I'm looking at lumber prices. I'm looking at building permits, et cetera. You look at housing.

You can go online now, and you can already see where people are taking their home prices down. Because they know the market is tightening up, and they don't want to get stuck with an asset, with a home, because the mortgage rates now go up, up, up, up.

So I'm starting to see price reduction on existing homes. I'm starting to see home permits drop. I'm starting to see lumber prices drop. So the Fed is doing what they have to do to try to dampen this thing down. It's painful. None of us like it. But at least it's doing something positively to try and slow this thing down before it's totally out of control.

ANDY SERWER: Are you throwing shade at the administration, Bob? If President Nardelli was in the White House, then, what would you do if it was your administration?

BOB NARDELLI: Yeah, well, that would never happen. But let me share some thoughts on what I might do. You know, I ran GE power systems for four or five years, so I have a little bit of experience on the energy side. And I think we have woefully surrendered our energy independence on the first day of inauguration.

I would go back and open up the fracking on government land. I'd reissue some permits. We keep hearing a lot of these 9,000 permits, Andy, but as an old oil and gas guy, you have to go out and survey. You have to construct before you can produce. So those are a longer-term fix that is legitimately true, but we need something today. So that's number one.

Number two, at one point, we had over 500 container ships floating on the water. We had to pay $28,000 for a 40-foot container that we used to pay $2,000 or $3,000 to move product from Asia or Europe here. So we talked about increasing the ability to unload these containers 24/7. That has not happened.

Let's get the Corps of Engineers. Let's get people in there that know how to do this and get goods moving. That's going to help price. It's going to help, in many of my smaller companies, allow us to get critically needed parts and components to complete an assembly. We're, in some cases, sitting on $50 million of inventory for the lack of a part. And so, therefore, we can't deliver it to our key customer. So I would get supply chain going again.

I would look at some of the other issues we have out there. Look, baby formula. Why wouldn't we just move on that turbo? Let's get the right people, the right technology in place, go to those plants that are producing formula here in the country, and get it up and running with FDA approval. There's a million things we could do, Andy, if we were serious about trying to get this economy stitched back together in a meaningful way. Look, I just don't see it happening. I'm sorry.

ANDY SERWER: Just to follow up on your first point about energy independence and opening up more drilling, Bob, aren't you concerned about climate change, though? And even if that's temporary, that's heading us in the wrong direction on that front.

BOB NARDELLI: Now, look, we all support climate change. We all support reducing CO2. The issue is the way and the speed with which we try to get there. You talk to any CEO and you try to turn that battleship in 30 days, and you're going to have a problem.

So I think there's a steady, predictable way to get there. I don't think we need to penalize-- I don't think we need to penalize the people within this country that are suffering right now with gasoline prices. So some of them-- I spoke to a person this morning, and she had to quit her job because she was driving 30 miles a day. And now she's going to try to find a job closer to home.

These are true stories of the hardship that's being imposed as we try to transition. I think we all support a transition of climate change, CO2 reduction. It is the rate with which we can digest that. And the fact is-- and if we want 100% electric, you couldn't charge your car, anyway. You couldn't charge it anyway.

Our grid system, the infrastructure and the amount of power required, we'd have to-- like China. Look at the number of coal plants they're building right now. Isn't that going to offset the global climate issue? I mean, it is one universe that we're operating in.

ANDY SERWER: Right. Well, I guess you could argue, we don't want to be like them. And I hope you're not suggesting that we start building tons of coal plants, right?

BOB NARDELLI: Well, no, I'm not. I'm just using that as an example. For every one we close down, they're opening a couple more. Now, look, there's significantly better solutions-- natural gas, natural gas turbines. We built a lot of them. During El Niño, we must have put several dozen LM6000s throughout New York to avoid the brownouts, which, unfortunately, we may experience this year.

ANDY SERWER: Right. I want to switch over to supply chain. I mentioned that you used to be the CEO of Chrysler. I want to ask you about the deficit of computer chips in the automotive industry and any other issues that you see as being particularly troublesome when it comes to supply chain, Bob.

BOB NARDELLI: Yeah, so you've hit on the biggest one right now, Andy, and that these critical chips-- our cars have become mobile computers, if you will. I mean, the amount of electronics-- the average person may not know, but your accelerator is no longer actuated by cable, but it's a wireless connection, electronic brakes, electronic wipers. So all of that takes electronics.

I'm sure you're hearing, as I do, that a lot of the features-- not the safety features-- but a lot of the add-on features that have developed over the years to make sure you stay within the right lane, back-up devices, positive separation, et cetera, those chips are being redeployed to higher-margin vehicles. So again, back to my point-- price increase, shifting to higher-margin vehicles. And therefore, what we're seeing is the average price on an ICE-- Internal Combustion Engine-- is also higher now because of availability.

And you could criticize the energy industry. You can criticize the auto industry. You know, why aren't we holding prices down? Well, because their cost is going up. And somewhere, that has to be adjusted for. And unfortunately, a lot of it's being passed on to the consumer today, unfortunately.

ANDY SERWER: Let's talk about your career a little bit as a manager. How did you get your first job at GE, Bob?

BOB NARDELLI: Well, that's a great story. And I graduated in 1971, and the job market was flat to down. And so I interviewed when I got out of school. And I was going to sell life insurance. I had an offer to go to work in a management training program for a large steak house kind of an affair. And then the good Lord looked down on me and felt sorry for me. And I got a job at General Electric as a manufacturing engineer in Louisville, Kentucky on the factory floor in refrigeration department.

And from there-- I went through a two-year program at GE so that I took my core curriculum from college and really reprofiled that to think the way GE thought, whether it was design for experiments, accounting, et cetera. And then, after a two-year rotational program, I went on and got my MBA at the University of Louisville.

And so I've been very fortunate to be given opportunities. I think I've seized those opportunities and delivered on those. And over the course of the years, Andy, I was able to get increasing levels of responsibility and accountability at GE. We moved 13 times over the course of my career and each one with more responsibility, more accountability, but the opportunity to continue to build my toolbox of experience. So the portability of what I learned has been tremendously helpful.

But equally important is the teams I've been able to build and to set a strategy, delegate, hold accountable, and see the kind of results. If you take Home Depot, where we went from $40 billion to over $90 billion in five years, opened a thousand stores, created Home Depot Supply, went from zero to number one in Mexico. So those things are the thrill of victory. And we had one tremendous team in place to be able to accomplish that, Andy.

ANDY SERWER: Want to ask you a follow-up about GE. You worked with Jack Welch, knew him. I think your nickname, at one point, was little Jack because you were friendly with him and had a close relationship. But of course, people are now calling into question his tenure and his management style. There was a book recently about that. I'm sure you've thought a lot about this, Bob, and I'm wondering what your take on Jack Welch is today.

BOB NARDELLI: Yeah. So Andy, it's a very emotional and sensitive point you bring up. I have only the highest regard for Jack Welch. He was a tremendous mentor, tremendous supporter of me and thousands of other individuals in my position.

One of my things I'm most proud of is in his book when he said Bob Nardelli is the best operating guy he's ever had, ever worked with. So with Jack, it was kind of a quid pro quo. He set expectations that encouraged you to reach and stretch, to reach goals you otherwise may not have achieved, and hold you accountable. But he was a demanding individual, but he had a big heart.

Jack knew my wife, knew my children. And he was the individual that could be very stern and give you constructive feedback. But he would still put his arm around you and make you feel extremely important.

And so he had the magic of being able to challenge you for delivery and, at the same time, make sure that you were highly regarded and respected. And if he knew you were stretching and taking a swing, he would encourage that, even if you didn't get it.

So I can give you example of example after Jack and his kindness and his understanding. And his people skills were as equally as strong as his business acumen. He knew that business. He was a real special breed that could run a conglomerate.

Many people can't do that, as we saw more and more today, where individuals are being challenged, and you've got activists trying to break up companies because they aren't able to run a conglomerate, which gives you the flexibility and gives you the optionality to push and pull businesses to be able to deliver on your commitment to those critical shareholders that have entrusted their money into your leadership, Andy.

ANDY SERWER: Just to follow up and maybe push back a little bit on that, Bob, so two-part question, first of all, was that book, "The Man Who Broke Capitalism," was that a fair assessment? And then, if Jack was all that, then what happened to the company after he left? Was it all Jeff Immelt's fault, or what do you think?

BOB NARDELLI: Well, as it would relate to the book-- let me be careful in that hopefully, you would have had the experience that Jack had before you could criticize him. And so it's-- second, I think it's a little-- I don't think it's appropriate to go after someone that's passed away, that doesn't have the ability to defend themselves. So that's just my point of view.

I mean, I know some people have applauded that book. I'm not one of them. But that's my opinion. And he's welcome to his opinion. The people that support that book are welcome to their-- all I can tell you is someone that lived with him for 30 years probably is in a better position to comment than an observer. That's number one.

And number two, jeez, it's heartbreaking to see what happened to GE. I put 30-plus years of my life in it and thousands, thousands, of individuals at every level I've built a relationship with. And to have something that was at the top, the highest performer, highest market capitalization, to now see that it's barely a fraction of what it was is heartbreaking.

And so whether it was the leader, whether it was the board, whether it was the economy, whether it was competition, it could have been any one or all of those things that, unfortunately, has GE where it is today. Andy. I can tell you, when we get together, some of us senior people look back on our experience there, we look back with tremendous pride and joy. And it's just sad to see where it is today.

ANDY SERWER: You ran Home Depot, as I said, Chrysler. You also were the CEO of a gun company for a couple of years on an interim basis. What was that like? And what does that business need to do better, Bob?

BOB NARDELLI: Yeah, so what you're referring to, Andy, when I went-- after leaving Chrysler, I went back to Cerberus Capital. And I was the CEO of Cerberus Operation Advisory Company. We had about 40 companies. We were doing an equal amount in revenue of those companies.

And so we had a team of about 150 to 175 individuals. And at times, we would create the Office of the CEO when there was a change in the business leader. And we did that at Remington. We did it at Blue Bird Bus. We did it at NewPage. We did it at Seibu Holdings over in Tokyo, BAWAG Bank in Vienna.

And so running a gun company had tremendous challenge to it, obviously, even more so today with all of the issues with the culture and the environment that's out there today-- anti-police, defund the police, et cetera. What we see on crime rates today in every major city adds to the complication of people that are illegally getting access to firearms.

So we were really committed to high-quality, good control. We didn't have large magazines at the time, et cetera, et cetera. So it's unfortunate how that industry has progressed and, as a result, has gotten entwined with many of these very, very unfortunate loss of lives around the country. So it had its place for outdoor, sporting, et cetera. Unfortunately, a lot of that armament now has been misplaced and misused, Andy-- very unfortunate.

ANDY SERWER: Running a business, as you've suggested, Bob, today, just gets more complicated. I mean, it's a digital world. It's a COVID world. You have to be aware of diversity, equity, and inclusion. How different is it? And what's important for an executive to focus on going forward?

BOB NARDELLI: Yeah, well, you hit it on ESG-- the Environment, Social, and Governance. And all of us now, as CEOs, and our companies are being asked to do a report on an annual basis, a disclosure report of what you're doing on ESG.

When I was at Home Depot, we were, I think, one of the leaders in that area from the standpoint of we hired 35,000 veterans. And we were recognized to help veterans get back into the workforce. We had probably the largest number of National Guard called up during that period of time. And we had a blue star flag in our hallway for every employee, every associate, that was called back.

We made sure that their pay, if they were getting paid less in their position in the military, we made up their pay. If they had a problem at home, we would fix it for them. We set up call centers at the time, 30-minute increments, where they could talk to their loved ones or their family. We had a reimmersion program. So we took that whole issue of diversity and inclusion way back during 2000, 2005, during some of the skirmishing.

So the environment, again, we're all being asked to report carbon footprint, not only within the company you're running but downstream in your supplier base. And so all of that, I think, is moving in the right direction. And back to our earlier discussion, I think it's a thoughtful, manageable way to move towards reducing the carbon footprint in our country.

If you try to push that too hard, too fast, I think we're going to have some dislocation out there today. So environmental, social, and governance, I think we're seeing governance, also, at the board level, we're seeing more diversity. We're seeing more inclusion. Boards are becoming more aware of that. They're having to report that on a more regular basis in their proxy reports, our annual reports. So I think moving forward with ESG is a good thing.

ANDY SERWER: And final question, Bob, what would you like your legacy to be?

BOB NARDELLI: Well, a couple of things. I think, looking back on what we accomplished in each of these businesses, what I was able to do with the teams and the succession planning that we put in place. If you look at the person running Tractor Supply today came out of Home Depot. If you look at the person that's running Lowe's today, came out of Home Depot.

If you look at the individual running Floor & Decor today, came out of Home Depot. The person running Home Depot today I hired in 2002. So to me, being able to mentor, coach, and present opportunities for them to grow, both individually and grow the business they were assigned to, is very, very important to me.

I think the other thing my legacy, hopefully, is-- I have four children, three grandchildren-- and hopefully, I've been able to impart hard work. What I look for is people that have energy, the ability to energize. They have a childlike entrepreneurial spirit. And then the bottom line is that they execute.

So if my legacy can be four great children, three great grandchildren, my wife and I have been married 51 years. And I'd like to think that the businesses I've been fortunate enough to work in are better today than when we got there.

ANDY SERWER: Bob Nardelli, CEO of XLR8, former CEO of Chrysler, former CEO of Home Depot, thank you so much for your time.

BOB NARDELLI: Thanks, Andy. I've enjoyed it. I hope we get to do it again. Thank you.

ANDY SERWER: You've been watching "Influencers." I'm Andy Serwer. We'll see you next time.

[WHOOSHES]