Peter Arnell Comes Back to Chrysler: Savior? Svengali? Or Both?
April 13, 2008

By Dale Buss

Two things are clear about Peter Arnell. He and his ideas are stepping on some mighty big toes at Chrysler. And he isn’t transgressing quietly.

But two other matters aren’t so certain – and, ultimately, they’re more important to the success of CEO Robert Nardelli’s recent move to bring in the controversial branding Svengali as the company’s “acting chief innovation officer.”

The first decisive question about Arnell: Can everyone get over the debacle that ended his first stint with Chrysler a few years ago? And the second is: Can Arnell really bring significant and quick improvements to the company now, with his broad edict to overhaul crucial areas including product design, passenger-facing technology, branding and dealerships?

“It’s a smart move” by Nardelli, said Jim Schroer, the former chief marketing officer for Chrysler who hired Arnell the first time he consulted with the company, in 2001. “But it will create all kinds of tensions.”

Arnell himself has another view of his new role at Chrysler and of his well-chronicled reputation for getting his way. “The type of urgency we have now is the type that makes companies win,” the 49-year-old founder and chief creative officer of Arnell Group, a unit of Omnicom, told AutoObserver.  “I want to get stuff done quickly. I want to move through a large corporation as swiftly as I can to make contributions and build it.”

Mixed Baggage

As another way of pressing his own sense of urgency to rebuild Chrysler, Nardelli returned Arnell to the company a few months ago with enough baggage for a crew of porters.

Arnell brought plenty of good stuff. An architect and designer by training, he is considered a pioneer and one of the world’s foremost authorities in integrated design and marketing. His roster of consulting clients boasts Fortune 500 corporations ranging from Johnson & Johnson to Unilever, Pfizer to Masterfoods. Arnell redesigned Pepsi’s packaging, Banana Republic’s stores and Bank of America’s branches.

His Rolodex of celebrity contacts is legendary: Donald Trump called him a “dynamo”; architect Frank Gehry, a “bold genius”; and Rudy Giuliani “a very, very unusually talented guy.”

Arnell Group ballooned to revenues of $23.1 million in 2006, according to Advertising Age. And while the agency swelled, Arnell himself dwindled, losing 250 pounds several years ago in a well-publicized, healthy plunge to a weight of around 150 pounds.

Plus, Arnell occupies a warm place in Nardelli’s heart after they launched Orange Works, an in-house skunk works, while Nardelli was CEO of Home Depot. Orange Works’ most heralded innovation was an ergonomic fire extinguisher called Home Hero that was attractive enough to park on the kitchen counter.

But Arnell brought along some foul-smelling items as well when Nardelli recently installed him on the 15th floor of Chrysler’s Auburn Hills, Mich., headquarters, along with the CEO and co-presidents Tom LaSorda and Jim Press.

For one thing, the ample-egoed Arnell has attracted plenty of scorn, from the epithet “over-hyped” to his description as one of “New York’s worst bosses” by media blog Gawker.com.

Despite his many successes in fusing design and brands, Arnell doesn’t exactly have an infallible Midas touch. For example, he redesigned Kmart’s stores a few years ago -- but the much-ballyhooed exercise didn’t pull the once high-flying retailer out of its death spiral.

The Last Straw?

And amid the competitive bloodbath of recent decades, auto-industry executives and managers expect a certain amount of esprit de corps and even gentility that the single-minded Arnell simply isn’t used to providing. There’s still a “way to do things” in a business where the extraordinary ruthlessness of General Motors’ erstwhile procurement chief, Jose Ignacio Lopez de Arriortua, remains a palpable horror more than 15 years after he left the company and took some of its secrets to Volkswagen.

Nardelli already has stomped on such sensitivities as he carries out the  mandate from Cerberus Capital Management, Chrysler’s privately held new owner, to fix its investment quickly. For example, he has brought his own former supplies chief, from Home Depot, into an industry where the conventional wisdom is that squeezing still more price concessions from long-beleaguered suppliers would be more difficult than getting blood from a turnip. Nardelli also has made a personal critique of many specific flaws in Chrysler’s vehicles.

And generally, some perceive that Nardelli regards Chrysler and the entire industry as a backwater that is sorely in need of the transforming touch that he brought to Home Depot – until outrage over his outsized compensation packages forced his departure from the Atlanta-based retailing giant early last year.

First Time Around

Arnell’s re-arrival pushes the envelope even further. “He’s not ‘adding value’ – he’s like a � bull in a china shop,” said one industry executive. “He’s snookered a lot of people over the years.”

On that score, many at Chrysler already feel like Arnell’s biggest victims. The Celine Dion debacle is their main complaint. Arnell played a key role in Chrysler’s disastrous adoption of Dion, the French-Canadian pop songstress, as its spokeswoman in 2003.

Schroer said he recruited Arnell in 2001, into his first auto-industry gig, to help Chrysler “make an emotional connection between design and the brands” through vehicle styling, dealerships and marketing. Arnell went to work on initiatives such as Project Alpha, Chrysler’s first plan for omnibus dealerships that would display all three of its brands.

Arnell’s first signature project was Chrysler’s display at the 2002 North American International Auto Show in Detroit. The company let out all the stops visually, including construction of an “off-road” course for Jeep. By dint of Arnell’s schmoozing, the company also was able to recruit Dion to sing at the heavily gilded Chrysler display. And he pushed for her further involvement with the automaker.

Schroer, Arnell and their cohorts had been trying to redefine the Chrysler brand as the company’s elegant and upscale mark. In consumer research, Schroer recalled, Dion beat out the likes of Oprah Winfrey and others as “an approachable classy person.” They went against the advice of Chrysler’s lead ad agency, BBDO Worldwide – also, like Arnell Group, an Omnicom outfit – and made Dion the centerpiece of a planned three-year, $14-million Chrysler branding campaign.

Disappointing Diva

Arnell’s agency was hired to produce and direct the TV commercials, and the first thing they did is depict Dion actually singing in a Pacifica and singing about Town & Country. The results were catastrophic. Dion’s personality didn’t connect with Chrysler buyers. Dealers revolted, and Chrysler quickly deep-sixed the campaign.

“Had we waited to launch that campaign for the new 300 [sedan],” Schroer said recently, “it would have clicked. But as it was, we executed it with too much Celine and not enough car – before it was obvious what the brand was going to stand for.”

Schroer exited Chrysler shortly after that; now he is CEO of Carlson Marketing in Minneapolis. Arnell left, too. Not much later, Arnell was hooking up with Nardelli at Home Depot. Then, Schroer said, it was his idea last year for Arnell to approach Nardelli about the possibility of his helping out Chrysler again in a role as “brand-innovation guru.”

And clearly, Nardelli can use all the help he can get. “Chrysler is so screwed up that it’s beyond belief,” said one high-level executive of several Fortune 500 companies who has dealt with Cerberus since its acquisition of Chrysler. “It’s a very troubled company, fighting for its survival – and now against a recession. So what if [Nardelli] goes out and hires a guy who makes another million or so? They’re already putting so many resources against this thing.”

Living Room on Wheels

Arnell’s specific bailiwick is to advise Chrysler on vehicle designs and materials that consumers see and touch, the consumer experience at auto shows and in dealerships, development of new in-car infotainment systems, new products for the Mopar aftermarket group, and strategy for the Chrysler, Dodge and Jeep brands.

As Arnell discusses how he’s approaching his new Chrysler assignment, he tends to take off in large, loopy riffs of verbiage that expose his creative chops, then disappear into a bit of cloud-speak, and finally attempt to translate his ethereal notions into practical measures that he believes can help the company, its vehicles and its dealers.

For instance, today –- compared with his first exposure to the auto industry -- Arnell has noticed a lot of differences “from an ecological perspective, a societal perspective, a value perspective and a technology perspective.”

Now, versus seven years ago, he said in a phone interview from China, “the value of the car in people’s lives seems to be much more headed toward how one treats one’s home than how one treats one’s vehicle.” Arnell attributed part of that toward Americans’ cocooning impulse in the wake of 9/11.

“The internal experience with the car is headed much more into kind of a living-room mentality,” he said. “So we can invite into the equation from an ergonomic perspective many new thoughts on how to approach comfort, convenience, and communications – because those seem to be the basis for connectivity to the world.”

To the Moon and Back

Arnell continued on this theme, describing his ultimate goal as making the vehicle interior “the best room in your life.” He cited the increasing importance of the “think time” that consumers have in their vehicles. And yet he cautioned against creating so much stimulation through interior amenities that people forget their most important task: driving.

“If I asked my friend Buzz Aldrin [the astronaut and second man on the Moon] what was going through his mind as he landed that Lunar Excursion Model, the first thing he would say is, ‘To drive it correctly so it landed in the right space,’” Arnell said. “I don’t think that driving is any less of a priority for anyone in any experience.”

Bringing his monologue down to Earth, Arnell noted that “lighting, ergonomics, the filtration of air, and the seats” in vehicles “haven’t changed very much in 20 years. I’m not sure why we continue to just stare at these things – rather than cost.”

So, what to do? He’s helping Chrysler approach “new materials, building with things that are eco-friendly, driving toward a better communications system with telematics, designing better interfaces, and socializing the product and its purpose in consumers’ lives earlier” in the development and design process, Arnell said.

“It’s a strategy that calls for pacing, market savviness and invention, aligned with a highly intuitive or informed initiation of a design culture – that all comes together in a sweet spot,” he said.

And Arnell believes that ever-cyclical Chrysler is nearing such a moment again. “It happens pretty much every three to five years in this corporation, and I expect that the teams and the leadership will make tremendous contributions on those fronts, in that cycle, very soon.

“The company’s refocus and realignment will drive us to leadership again,” he said.

Intrusive Design

Given such crucial needs and lofty possibilities, Arnell said that Chrysler needed someone in a role “to align, discover, support, and drive ideas in a practical way toward an application that can be researched and prioritized or productized within the consumer experience.” But he said “it’s an orchestration of many parts. It’s not a solo play.

“It’s not a ‘me’ thing,” Arnell insisted. “There’s a lot of brilliance within the organization and a lot of passion and a lot of desire [to bring] tremendous newness into the total car experience.”

Nevertheless, Nardelli has formulated Arnell’s role expressly to opine and, where necessary, to dictate his will across the corporation. He reports directly to Nardelli, and his specific duties cross the fiefdoms of Trevor Creed, the company’s veteran vice president of design; Deborah Meyer, whom Nardelli recruited from Lexus last fall to become Chrysler’s new chief marketing officer; and Frank Klegon, head of product development.

“He’s been brought in to second-guess other people,” said the veteran Fortune 500 executive familiar with Cerberus from the inside. “You’re Nardelli, and you’re sitting in a room, and you just want another guy that you kind of trust. Not that the existing VPs are bad and he doesn’t like them – but the stakes are so high that [Nardelli] is thinking: ‘Let me just get another opinion, of someone I like, into the room.’ The calls are so big.”

Meyer offered her own take on the situation. “There are no obstacles [to Arnell] around anyone,” she said, although Arnell isn’t charged with addressing Chrysler’s advertising. At the same time, Meyer described Arnell as “a brilliant guy who’s bringing lots of great resources to us that we didn’t have before.”

Signs of Change

So already, one of the favorite parlor games inside Chrysler is trying to discern the Mark of Arnell. There’s talk of his famously eruptive and theatrical temper at meetings, of course. And some outside bloggers blame him for the recent departure of Mike Donoughe, vice president and chief engineer for Chrysler’s future midsize product team. Donoughe headed a program to develop a segment-leapfrogging compact car, known internally as Project D. But through a spokeswoman, Chrysler denied that “the departure had anything to do with a clash with management, or with Peter Arnell.”

But Schroer stuck up for his old colleague. “He’s a world-class expert at getting the visual direction of a brand right; then it becomes the designers and marketers’ jobs,” Schroer said. “There’s a tough set of handoffs that happen in that process, going from the ideal to the practical.”

At the same time, Schroer guessed that Nardelli and Arnell would persevere. “This is a long-term move,” Schroer said. “You don’t bring Peter Arnell in if you’re just thinking about the next quarter.

“Chrysler lives and dies on vehicle hits, and Bob [Nardelli] is smart enough to know that. They’ve never been the big guy who can rely on scale and economics; and they haven’t had a leading technology since Walter Chrysler. They have to be a leader in design and in brands.”

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