Chrysler Set to Push More Suppliers Over the Edge
Tata Consultantcy Services may regret their contract to take over Chrysler's information technology (IT) services. Automotive News [sub] reports that Chrysler "asked its non-production suppliers for a 5 percent across the board cost reduction" effective June 1 and effective for one year. "Non-production suppliers" are those providing IT, administrative, custodial and other support services not directly involved with producing automobiles. A statement from Chrysler explained their "recent decision to enact a 5 percent cost reduction on non-production materials and services is part of Chrysler's ongoing efforts to reduce its cost footprint in a highly competitive marketplace." From what we've seen, these "ongoing efforts" also include [s]stiffing[/s] delaying payments to some suppliers and asking others to take a 25 percent cost cut. Some of these beleaguered suppliers can't take beatings like this much longer before they follow Plastech into Chapter 11. But maybe that's what Cerberus wants, because it would give them an excuse to take Chrysler in the same direction.
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Nardelli sure is doing a swell job so far...
Any large diversified company that is not exposed to the auto industry is just going to laugh at them. GM recently tired to play a game like this with my employer. AFAIK after they were told pay the contracted amount or service stops on X date they coughed up.
The lousiest part about it is that the announcement is the only time Chrysler will mention it to anyone. All they do from her on out is reduce their payments for all PO's received. As a supplier, you have no recourse for the lost revenue. It's just gone. The only retaliation any supplier has is to no quote future Chrysler business. Unfortunately, many of them depend on Chrysler for more than 50% of their current business so that's not a real short-term fix.
It's kinda like watching someone try to bail water out of a sinking boat with a thimble...