Inside Chrysler's Supplier Squeeze

Edward Niedermeyer
by Edward Niedermeyer
inside chryslers supplier squeeze

Since taking over as Chrysler's purchasing boss in January, John Campi has whipped the Cerburian dog into an appetite for hardball supplier tactics. And the pressure to hoist the black flag and begin slitting throats is coming from Cerberus, who have mandated a $1k per vehicle cost reduction within three years. Automotive News (sub) details Chrysler's nasty legal battles, from the shockingly crass Plastech debacle to (relatively) petty suits against giant firms like Magna and JCI. When asked about his law-firm-fueled approach, Campi talks a blunt party line. "I will work with every supplier I can in a collaborative fashion to help them become profitable and help us. "But we don't have the wherewithal to prop up a supplier simply to keep them running. I won't do it." And oil, steel and plastic price hikes be damned. Supplier lawyer Fred Smith of Warner Norcross & Judd characterizes Chrysler's negotiating style as "we don't care who is at fault, you will contribute; give us money if you want to maintain a parts relationship." Acknowledging that several suppliers have threatened to stop production over price negotiation, Campi has only tough talk for the malcontents."If a supplier wants to push us because of their fear, then they are violating the contract in place, and I will take the necessary action," he glowers. "And I say, I'm not going to let you shut down production. If you're serious about this, you have to live with the legal consequences." But, after showing off all the lawyers in his Rolodex, Campi seems to remember that Chrysler has to at least appear to care about its middle- to long-term, and pledges "equally shared benefits." Meaning there's plenty of nothing to go around.

Join the conversation
4 of 16 comments
  • Psarhjinian Psarhjinian on Aug 26, 2008
    I figure Magna and J.C. gotta be on the verge of telling Cry sler to take a flying leap. Magna was actually bidding for Chrysler, but got beat out by Cerberus. I remember thinking that it wouldn't be such a bad thing, because at least Chrysler's primary parts supplier would have a vested interest in quality parts, as well as no worries about maintaining profit margins because, well, it'd be the same company. The only reasons I can see their being sold to Cerberus is a) money and b) that, under the thrall of the three-headed dog, there was no chance Chrysler would ever recover and pose any kind of threat to Benz (remembering that the 300C SRT-8 and ME412 were very much frowned upon by the Benz guys). The more I think about the whole DaimlerChrysler escapade, the more I think that this was scheme on Daimler's part to gut a competitor for cash and expertise. That it ended up costing them money is probably attributable to Daimler's collective management arrogance.

  • Hitman1970 Hitman1970 on Aug 26, 2008

    This just makes me shake my head. How do we improve quality? By boning our suppliers and demanding the cheapest parts on the planet of course. At least now I know where the plastic that is too low quality to make toy Army men goes.

  • Redbarchetta Redbarchetta on Aug 26, 2008

    Here is a point no one has mentioned. Wouldn't the suppliers they are screwing out of their hard ended money make up a pretty good majority of the customers that Chrylser has left, the loyal ones. If you were the guy on the line making Dodge widgets and you saw your employer being flushed down the tubes because of Chryslers management and food being taken off your table because of cuts or possibly unemployment would you go out and buy one of their products, if you could even afford it at this point. Especially knowing that part you just made is total crap, and would you recommend your relatives to buy said product. These guys are shooting themselves in the foot and they don't even know it, every customer they lose at this point is NEVER coming back.

  • Hal Hal on Aug 27, 2008

    @psarhjinian: I'm tired of people trying to blame every problem Chrysler suffers on Daimler. Schremp overreached, bought Chrysler at the top of the market thinking he was buying market share but instead he had a junk company on his hands with a dated model lineup, dated plants and a workforce on unsustainable contracts that had been in and out of crisis for decades. Daimler pumped billions into Chrysler in an attempt to turn it around, and in the end gave up and essentially paid Cerberus to take it off their hands before the disaster that is Chrysler infected the whole company. "I think that this was scheme on Daimler’s part to gut a competitor for cash and expertise." You are joking right?