Bruce Nussbaum, who is responsible for coverage of design and innovation at BusinessWeek, recommended in May 2007 that Cerberus, the company that acquired Chrysler, should not just focus on cutting costs but use its long tradition of design to reshape the company.

I have some advice for the private equity firm Cerberus that appears likely to buy Chrysler from DaimlerChrysler—don’t just cut costs, the way you always do and then flip the company back out to the public. Instead, use Chrysler’s deep tradition of design and innovation to reshape the company into a 21st century consumer-driven, adaptable and cool auto giant.

It seems that Cerberus and Chrysler are not just focusing on cost-cutting but are indeed focusing on design and customer experience. AdvertisingAge reports that Chrysler hired Peter Arnell as its chief innovation officer. At least he has some history with Chrysler, even though he is probably not proud of that.

That the man who’s won raves for reworking Pepsi cans and bottles and conjuring a fashionable fire extinguisher for Home Depot is taking on a C-level design role at Chrysler opens a new chapter in Mr. Arnell’s rags-to-riches, fat-to-slim, celebrity-drenched biography. But rather than look at it as a chance to make good at the automaker that let his agency go in the aftermath of a 2003 ad campaign starring Celine Dion, he insists the post is about solidifying his reputation in a community that maybe hasn’t taken him as seriously as he’d like.

David Kiley of BusinessWeek’s BrandBlog sees the whole story from a different perspective.

The presence of Arnell in such key areas as product planning and design tells me that CEO Nardelli doesn’t yet have his arms around the auto business. If he has issues with his chief of design and chief of product planning, then he should replace them, as has been widely rumored for months anyway. Adding an ad-man who has Celine Dion on his speed dial is not going to make these guys get smart.

One of the areas Arnell is said to be consulting on is interior design. For more than a year, it has been clear that Chrysler lost the plot on interior design, opting for cheap looking materials on all of its new vehicles. Memo to Mr. Nardelli. The designers didn’t procure interior materials that look like they were from a 1994 Hyundai parts bin because they thought it looked hip. They did it because former COO Wolfgang Bernhard and CEO Dieter Zetsche told executives they had to take 40% of the cost out of the interiors regardless of the outcome. The result is a flock of products that have been panned by consumers in J.D. Power APEAL ratings, which judge such aspects of the vehicles.

Even though Chrysler has realized that they need to focus on design, everything depends on the people who design cars that you want to buy. Only time will tell wether Chrysler is already on the right track.

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