By on August 25, 2008

No, you don\'t understand. We want the cash, not a relationship. 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.

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16 Comments on “Inside Chrysler’s Supplier Squeeze...”


  • avatar
    Cicero

    I’ll bet those browbeatened, threatened suppliers really go out of their way to make sure their Chrysler parts are just the best damn quality on the planet.

    One more reason to never consider buying a Chrysler vehicle. (Like I needed another one.)

  • avatar
    jerry weber

    Cicero, you have said it all. Chrysler who doesn’t have the quality awards going into this fight, is now going to build cars with cheaper parts. Cars & the parts in them have get to get more expensive because commodity prices for the raw materials is escalalting along with energy costs to make and transport them. To drive them down on top of this is to say, we don’t care what the parts are really like, just make them cheap. I don’t know how Ford and GM fit into this equation but it won’t be pretty. Remember many of these parts were made in house by captive supply plants like GM delco, Ford Autolite, And Chrysler Mopar. Ever since spinning these plants off, there has been a race to the bottom to strangle this industry by price cuts. So the present chrysler cut requests comes on top of how many others in the last few years? Can any vehicle be better than the parts that go into it?

  • avatar
    Pch101

    Can any vehicle be better than the parts that go into it?

    No, they can’t.

    But in Chrysler’s case, it may not matter much, because the plan seems to be to outsource most of the production. They won’t need to worry about parts quality if they aren’t assembling anything.

  • avatar
    NickR

    I’ll bet those browbeatened, threatened suppliers really go out of their way to make sure their Chrysler parts are just the best damn quality on the planet.

    Can you imagine the corners they’ll cut after that kind of treatment? The new rule ‘Any part that won’t result in expensive litigation goes out the door’.

    Alternatively, I am sure there’s a Chinese plant somewhere dying to make some cheap shit parts to sell to Chrysler. Even if Chrysler does end up holding a fire sale, I still don’t think I’d buy.

  • avatar
    Packard

    Squeezing suppliers has always been a substitute for an effective business strategy, and a sign that the management is clueless. Sound management doesn’t allow suppliers to overcharge, but does recognize that a supplier who cannot profit from the parts sales to the manufacturer cannot provide quality parts needed for the production of a quality product.

    This is merely another sign that Nardelli was the wrong choice, and that Cerberus was foolish to buy the company and then to hire Nardelli. When a guy’s last employer was so desperate to be rid of him that they were willing to, and did, pay $160 million to get him to leave, exactly what level of intellect hires the guy to run another company?

    Guess we all know the answer.

  • avatar
    Dimwit

    B.S. talks. I figure Magna and J.C. gotta be on the verge of telling Cry sler to take a flying leap. They don’t need the headaches and can you imagine someone actually negotiating a *new* contract with these deadbeats? It’d be COD every shipment if it was MY company.

  • avatar
    Ryan

    When it comes to Chrysler… Stupid is, as Stupid does.

  • avatar
    AG

    What ever happened to good ol’ Adequate Assurance of Performance? You want your parts you pay some of it up front.

  • avatar
    gogogodzilla

    Honestly, if I were a supplier to Chrysler…

    …and they demanded price reductions, I’d agree for the span of the contract.

    But I’d give them whatever product I could make at a decent profit margin. So if it’s less sturdy, or flimsier, or is made of paper & glue… well, too bad – Chrysler can ALWAYS terminate the contract!

    Which would be what I’d be looking for. No reason to maintain a contract that’s a losing proposition – unless there is a legal threat. And if Chrysler cancels, then the breach of contract is from them.

  • avatar
    truthbetold37

    Plastech got what they deserved because Julie Brown abused her power and milked the company.

  • avatar
    BuzzDog

    Ah, memories of a dozen years of so ago, except then the company was Volkswagen, and Jose Lopez was hammering suppliers by using the techniques he’d perfected at (and some prefer to say “stole from”) General Motors.

    The end result was another black eye in the reliability department for VW, with certain parts developing a notorious reputation for failure.

    I’m reminded of a comment attributed to John Glenn, in response to a reporter’s question as to what he was thinking when he was orbiting the earth in Friendship 7. To paraphrase, Glenn allegedly stated, “I kept thinking that every single part of this tin can was made by the lowest bidder!”

  • avatar
    rpol35

    Buzzdog beat me to the punch as I was going to bring up Lopez at GM (J. Ignacio Lopez(?) I think was his full name); what a disaster he was. I worked for a transportation supplier at the time and my company incurred, what we knew would be his short lived wrath.

    Typical of Chrysler to go the complete opposite way that the Japanese manufacturers have operated for decades and the Japanese model clearly works well.

    Chrysler was the first of the domestics to truly outsource parts in a big way and it worked OK, at the beginning (Why use UAW labor to make bumper bolts, right?).

    Chrysler’s vehicles are so questionable now in consistency (I know, I have a recently made one) that this tactic will ensure continued mediocracy at best and outright contempt for their products, from customer and supplier alike, at worst. This is the act of desperate people, not business professionals.

  • avatar
    psarhjinian

    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.

  • avatar
    hitman1970

    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.

  • avatar
    Redbarchetta

    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.

  • avatar
    hal

    @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?

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