Chrysler wants suppliers to help cut costs

Tuesday, August 30, 2005

Chrysler wants suppliers to help cut costs

Incoming chief executive LaSorda said he is shopping for big percentage reductions.

By Jeff Bennett / Bloomberg News
Autos Insider

DaimlerChrysler AG’s Chrysler wants suppliers to provide technologies that can cut costs as much as 30 percent because of pressure to hold down vehicle prices, said Thomas LaSorda, the unit’s incoming chief executive.

“What we are saying to suppliers is bring us your innovation, bring us your technology but don’t just tell us it will give a 3 percent savings,” LaSorda told reporters at a conference in Detroit Monday. “Break through that, get creative and innovative and bring us the stuff that can save us 10, 20 or 30 percent.”

Chrysler is seeking to build on sales gains of 7.7 percent this year through July, more than the industry’s 4.2 percent rise. Chrysler sales surged 27 percent last month as it followed General Motors Corp. in offering employee prices to all buyers. LaSorda wants suppliers to contribute to lower manufacturing costs and improvements such as increased fuel efficiency.

“The marketplace is tough out there,” he said. “Material is the greatest bulk of our buy from our cost standpoint. I also got the fixed costs and the manufacturing costs. Since suppliers control the bulk we need big percentage reductions.”

LaSorda, who takes over Sept. 1 from Dieter Zetsche as chief executive of Auburn Hills-based Chrysler, said he’ll be shopping for lower parts prices. “If I find a part worldwide that can be built for $14 and they say, well we want to build it here for $20, it’s their choice but we are only go to pay $14,” he said.

U.S.-based auto-parts makers such as Delphi Corp., Lear Corp. and Dana Corp. have reported losses or lower profits this year as GM and Ford cut North American production because of slumping sales through May. Suppliers are cutting costs by eliminating jobs and closing plants at the same time as they try to improve product development.

Chrysler recently has instituted a new system whereby it rewards suppliers with more parts contracts when they hit certain cost and quality targets. The company has also said it will collaborate earlier with suppliers on vehicle programs.

The measures come in response to complaints that Detroit automakers make changes too late in the vehicle development process and blame suppliers when deadlines and quality targets are not met.

LaSorda said at least four suppliers have been awarded contracts under the new program. TRW Automotive, a Livonia-based safety systems supplier, will provide ergonomic switches for small and mid-size cars debuting in 2006 and 2007, respectively.

Iroquois Industries – a supplier of welded structural components in the chassis area – has also been awarded business for a 2007 SUV program.

Earlier this month, Chrysler said Johnson Controls Inc. and Magna International had been singled out for good performance and would produce interior components for a new crossover activity vehicle in 2008.

The U.S. shares of Stuttgart, Germany-based DaimlerChrysler rose 28 cents to close at $51.75 on the New York Stock Exchange.

Detroit News Staff Writer Brett Clanton contributed to this report.

Autos Insider

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