Chrysler's Cost Mandate: Get Blood From Supplier's Stones

When I was younger, I remember watching a British sitcom on public television titled Waiting for God. It was the comical story of a retirement home community whose residents were biding their time. Despite a recent government handout and cost cutting steps, it must feel the same way at Chrysler these days. According to a recent Wall Street Journal article (registration and subscription required), Chrysler is at least going through the motions of trying to save its way to survival. But I doubt that they'll be able to get significant concessions from a supply base that's already been beaten -- and sued -- to a pulp. I suppose you can't blame Chrysler for trying to crawl out from its shoddy product hole. Still, tactics like simply telling all of your production suppliers to "cut their prices by April 1" when they, too, are on the brink is not exactly a recipe for staying alive and keeping plants open. And kudos to Chrysler's resident supply risk genius who came up with the order to "freeze what the company will pay for raw materials, even if costs rise." That's real smart. You'd think that Chrysler would have learned a thing or two from GM who has recently encouraged its procurement organization and suppliers to use price indexes to reduce cost and create transparency.

Jason

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