Chrysler’s Flirtation With Supply Risk Disaster

John Campi, Chrysler’s new CPO, has certainly had a host of issues to deal with since taking the procurement helm. But his early promises of better supplier collaboration have not exactly been smooth sailing -- at least in the news headlines. According to a Bloomberg story from last week Chrysler faces a production shutdown thanks to a lawsuit from one of its suppliers. Dana, the litigious supplier in question, claims that it is losing $75 million per year thanks to rising steel prices which it can't pass on to Chrylser (or which Chrysler is not accepting). But Dana is not Chrysler's only challenge. The above-linked article notes that "the dispute is at least Chrysler's third this year as the automaker tries to shrink spending amid a 23 percent drop in U.S. sales. Chrysler rebuffed a bid for higher prices from Plastech Engineered Products Inc. in February and is tangling with Germany's Continental AG over a parts contract." So much for meeting the automaker's goal of "reducing parts-production costs by 25 percent over a three-year period."

Before the entire automotive supply base begins to look at Chrysler as the new GM of the industry, I'd suggest that Campi and his cohorts get on board with a new approach to building better supplier relationships rather than simply mandating cost takeouts and refusing price increases based on the commodity market environment. In my experience within the automotive market, Chrysler's current behavior is really asinine. A few years back I had the chance to meet an automotive supplier to GM who threatened to walk out of an unprofitable contract with GM unless they granted a price increase. GM relented, preserving the relationship. Perhaps Chrysler has a thing or two to learn from its Woodward avenue neighbor.

- Jason Busch

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