Nardelli is a former senior General Electric Co executive. As CEO of Home Depot, he was both credited with overhauling purchasing and technology systems and criticised by investors for "excessive" pay and severance packages; his own being a $120-million severance package and $20 million cash.

He becomes the second outsider to lead a US automaker in the past year after Ford hired Alan Mulally from Boeing as chief executive.

Tom LaSorda, who has joined on a $1 per year salary, with further compensation linked to the turnaround of Chrysler, will stay on as president and vice-chairman and continue to lead ongoing talks with the United Auto Workers union as Chrysler''s second ranked top executive and a consultant to Cerberus.

LaSorda had been widely expected to stay on as Chrysler''s chief executive through negotiations on replacing a four-year deal on wages and benefits for UAW-represented workers that expires on September 14.

The post of Eric Ridenour, Chrysler''s current chief operating officer, who is responsible for production and product planning, will not be filled.

The reshuffle at the top of the US automaker underscores the speed at which cerebrus is moving to rescue the loss-making automaker and the risks it faces.

Nardelli said in a statement, "Chrysler has many deeply talented and dedicated people, and I am confident that together we can continue the momentum of Chrysler''s recovery and return this great American icon to a path for global growth and competitiveness."

Chrysler is engaged in negotiations with the UAW aimed at reducing its hourly labour costs to make it competitive with Japanese rivals led by Toyota Motor Corp.