Chrysler aims to cut costs, improve supplier relations

Procurement chief Campi reiterates “arbitrary aggressive target” of 25% cost reduction.

By Dave Hannon -- Purchasing, 8/15/2008 1:29:00 PM

In an effort to inspire suppliers to work more closely with Chrysler, the company’s executive vice president of procurement John Campi has “set an arbitrary aggressive target of 25%” for reduction of supply chain costs.

In a speech to the Center for Automotive Research conference in Traverse City, Mich. this week as reported by Reuters, Campi told suppliers the target basically means “between us, we have to find ways to improve our supply chain operations."

His supplier-focused comments come only days after an annual survey of North American automotive OEMs by Planning Perspectives showed Chrysler had the lowest ratings from suppliers. According to the report, "Chrysler is in free-fall, continuing its decline from 2006 and is now in last place, slightly below General Motors, but Ford improved dramatically and jumped two ranks to fourth place.”

 Campi said that survey pushed him and Chrysler’s CFO to meet with 160 key suppliers Thursday to offer them a closer look at the company's books to reassure them of Chrysler's financial health.

“We did that specifically because of the trauma in the industry,” Campi said at the CAR's Management Briefing Seminars according to the Detroit News. Campi also told Crains Detroit Business that Chrysler was focusing more of its spend on its top-performing suppliers or “Suppliers of Choice.”

“A Supplier of Choice really is no longer competing for the business, but has that footprint of technology in our platforms, and will be engaged up-front in the design,” ,” Campi said in the Crains report.  “There will be winners, there will be losers. At the end of the day, we will be a stronger organization.”

Campi’s remarks are part of an ongoing “straight talk” strategy over the last two months. Campi, who is new to the procurement role this year, has been downright blunt about the state of OEM-supplier relations and commodity costs in the automotive industry. In July, he told the International Congress of the Automotive Industry in Mexico City that “All of us are kidding ourselves if we think there’s a magic formula to solve the spike in pricing of steel, base metals and other raw materials. The North American auto industry, no matter how big a buyer of these materials it is, can’t provide the leverage points to change demand or pricing these days.”

Chrysler officials also said this week they have identified more than $1 billion assets they could sell for cash and that they are in talks with automakers in India, Russia and Italy about possible partnerships.

 Also reported from the CAR’s meetings in Traverse City this week:

 “(Impact to non-ABF suppliers could be) potentially none, but in most of the commodities, it will over time mean that you will not be doing business with Ford Motor Co. We’ve got too much capacity chasing too few customers.” --Tony Brown, Ford group vice president, global purchasing, speaking about the suppliers in the company’s Aligned Business Framework program.

Source: Crains Detroit Business

“It’s also no surprise that [the top 20 suppliers] picked up 75% of new (GM) business in the last three years. Does it pay off to be a best-performing supplier? I would say yes.” --Bo Andersson, group vice president of global purchasing and supply chain, General Motors. 

Source: Crains Detroit Business

"The OEMs are becoming more deliberate of letting suppliers fail. Many firms will be let to fail in this terrible downturn.” --John Casesa, auto analyst at Casesa Shapiro Group.

Source: Detroit News

"We had no plan to quickly import fuel-efficient vehicles. There was no plan to make up the lost profit loss caused by the rapid drop in SUV and truck sales." --Tim Leuliette, CEO of Dura Automotive Systems, regarding the state of the automotive industry.

Source: Wall Street Journal