Is Chrysler Going to Bring Down the Auto Industry Supply Chain?

A recent article in the WSJ, Chrysler's Nagging Quality Issues gave a grim assessment of quality at Chrysler. By the two most visible measures of customer satisfaction, J.D. Powers rankings and Consumer Reports, Chrysler isn't doing very well. In the auto issue of Consumer Reports, not a single Chrysler vehicle made the rankings. "But while Ford and GM are largely battling outdated perceptions of questionable reliability, 'at Chrysler it's a reality,' says George Peterson, president of AutoPacific Inc., which each year surveys 40,000 car owners."

What's going on at Chrysler? Where did they go wrong on quality? And what will be the impact on its suppliers?

Chrysler did manage to rally and improve after a government bailout in 1979. The company became known for its unique and progressive supplier management practices. In 1989, Chrysler created a program called SCORE (Supplier Cost Reduction Effort) in which suppliers submitted cost reduction ideas. These ideas were supposed to have saved Chrysler $1B. Other industries were benchmarking and adopting Chrysler's supplier management practices. This program morphed into the Extended Enterprise Program when Daimler-Benz acquired Chrysler. Now Chrysler suppliers are being wiped out by extended shutdowns of both Chrysler and GM plants. As reported in the ASQ news, Chrysler Canada, for example, while not involved in the Chrysler bankruptcy filing, but in a parts shortage, was forced to close its plants. This has idled 8,700 workers indefinitely. Bill Pochiluk, president of industry adviser AutomotiveCompass, said that these shutdowns may result in the disintegration of the supply chain. Automotive suppliers have little or no cash flow. The number of jobs lost at GM and Chrysler may pale in comparison with the job loss in the automotive supply chain and beyond.

One can only speculate whether the shotgun marriage of Chrysler to Fiat will help them survive. Fiat does not have a solid reputation for quality and many are dubious about the union. But even if the U.S./North American auto industry manages to emerge from all of these troubles, will it have a supply chain left to support it? - Sherry R Gordon

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