Chrysler: The Engineering/Procurement Link

As I've written about before, of the Big 3 automakers, Chrysler has long been known as the most collaborative with its supply base -- at least until the past few years -- when it comes to joint product design and engineering efforts. Detroit insiders will tell you this was out of necessity -- Chrysler simply did not have the design budgets of Ford and GM going back to the late seventies and eighties. It's clear to me from reading this story (registration and subscription required) in the Wall Street Journal that Chrysler's old design ethos is alive and well, and now expanding globally (where lower cost engineering resources will collaborate with lower cost suppliers). To wit, "In coming months, Chrysler will expand operations at engineering centers in China and Mexico and will prepare to open others in India and Eastern Europe as part of a push to internationalize a company heavily dependent on its home market in North America ... [this] will help Chrysler cut engineering costs and move it forward in sourcing parts and selling vehicles in big developing markets."

When I read this story, I found myself nodding my head at the smarts behind the move. Mark my words -- Nardelli's strategy will ultimately prove prescient for global car buyers and Chrysler shareholders alike. By getting engineering closer to regional markets as well as global suppliers, Chrysler will have a leg up on others who are just placing greater emphasis on just procurement and sales in developing regions of the world. In automotive, the engineering/procurement link among top performing companies is one that is impossible to separate. The only danger in my mind in this move is whether it comes too late given declining forecast demand in the North American market to save Chrysler from a rough couple of years. But long-term, it will certainly pay dividends.

- Jason Busch

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