Chrysler to reduce parts spending by 25 percent over the next three years
05/19/2008, 1:59 PM
By Drew Johnson
Chrysler has announced a plan to reduce its parts spending by 25 percent over the next three years, a new report finds. The plan includes extending its production schedule from one week to 30 days, more parts sharing among vehicles and fewer last minute engineering changes.
Chrysler’s current production schedule gives suppliers about a one-week notice. The new plan will call for a 30-day notice, which should help cut costs by eliminating overtime, unforeseen production spikes and the purchase of excess materials.
Chrysler also plans to share more parts among cars that go unseen to the end user — such as wiring harnesses. Reducing late changes to engineering plans should also help to reduce costs, according to Automotive News.
If the aforementioned changes don’t net a 25 percent price reduction in the next three years, Chrysler says that it will ask suppliers to lower their prices.
Chrysler will also be pressuring suppliers to meet prices from India and China-based suppliers. Chrysler currently spends about $40 billion on parts per year, the vast majority of which are produced in North America. However, Chrysler’s head of purchasing, John Campi, feels that one of Chrysler’s biggest problems is that it is not sourcing enough parts from low-cost overseas suppliers.



05/19, 2:19 PM
posted by:
Impulsive
Just a matter of time before this company is done … China awaits your expected assets.
05/19, 2:23 PM
posted by:
RaineMan
Oh… so more badge engineering for Chrysler then?
I knew from the start that Cerberus was just going to run the company into the ground. I mean you don’t name your company after the dog that guards the gates to hades for no reason. Lead on boys… lead on.
I give Chrysler 5 years… 10 at the most.
05/19, 3:04 PM
posted by:
400horseSS
And we all know how thay’ll happen, buyouts, plant closings, swiping $10 an hour from workers, is this really news!
05/19, 3:13 PM
posted by:
400horseSS
And **** up the benefits too.
05/19, 3:17 PM
posted by:
Blakkarr
I don’t see this as a total negative. I do see fewer vehicles overall, but that could just mean the end of superfluous vehicles.
But, for now, it looks more like Cerberus is trying to cut out the inefficiencies in production. Hopefully this will also lead to a higher quality product as CHRYSLER will be encouraged to to get it right the first time instead of having the leeway to make changes up to the last possible minute.
I’m also glad more of the work in being kept closer to home. It probably will not last too much longer, another 10 years maybe. But For now it is still a good point.
05/19, 4:24 PM
posted by:
Get Real
More cheap parts to break.
05/19, 4:26 PM
posted by:
xyunya
I hope that Chrysler will come through it’s troubles. The company is probably 1/3 of it’s pre-merger size already and about the same as AMC that it bought some 20 years ago. If Chrysler gone in 5 years we will see only one US branded auto company (which is hardly producing anything in US anymore) GM. I believe that Kerkorian will manage Ford to merge with Nissan, which will be blessing for Ford and Kerkorian, but will cut into any manufacturing in US. Already the largest manufacturer in US probably Toyota, certainly not “home” brands.
05/19, 4:30 PM
posted by:
SigmaHyperion
“John Campi, feels that one of Chrysler’s biggest problems is that it is not sourcing enough parts from low-cost overseas suppliers.”
Yeah, John, that’s your problem. It couldn’t possibly be that Chrysler has probably the worst interiors of ANY automobile on the market, bar none. The LAST thing you need to be doing is trying to cheap out on what is already, without a doubt, the cheapest POS interiors on the market.
I want to see a press release where Chrysler says that it’s going to spend 25% MORE on interiors, not LESS.
Yeah, I know they can cut costs and increase quality at the same time. But there is absolutely no mention in this article of increasing quality, just cutting costs.
05/19, 4:40 PM
posted by:
cookie4me
How can producers here match prices from India/China. It isn’t a reality based on wages alone. Also, it isn’t a fair comparison because there is significant costs associated with logistics to get those parts to where they are assembled unless of course you are assembling the car over there… Oh wait, I get it..
05/19, 5:23 PM
posted by:
johnnycanuck
It’s far too early to be calling Cerberus out. These are simply business decisions and I for one would not presume to outguess them. Just about everyone on this forum seems to be giving them 5-10 at best. I want to see at least 2 or 3 new model introductions before I pass judgement. If the Challenger and the new Ram are anything to go by, I think many of you may be a little premature with the obituary.
05/19, 5:47 PM
posted by:
xyunya
johnnycanuck, Cerberus has a tough road ahead of them. Challenger and Ram started life under Evil Empire rule and may not represent future. Those cars certainly cant pull Chrysler out of doldrums. One is a show car – showroom filler and both may or may not sell in tough times. I would like to see where they will go with Caliber (should sell well -useful with range of 4 cylinder engines) and perhaps Chrysler can bring something out quickly based on the same platform. At the moment Cerberus understands market better then GM & Ford the question is if they can react with small war chest.
Parts spending reduction is a great idea from the play book of Inaki Lopez. Lopez was the most promising exec at GM who left to VW and build the best quality Passat.
05/19, 6:28 PM
posted by:
DialM4Speed
Yeah I hate to say it but I agree completely with Impulsive. This just gets worse and worse! Trying to force suppliers to cut there prices to match other countries? Wanting to buy parts from China? (they didn’t say that but we all know that’a what there talking about) Do the almost weekly recalls of stuff from China not make you think… Hmm… I wonder if this is a bad idea? Trying to reduce changes to engineering??? How the **** are you gonna avoid that? “Uh…sir we’ve found a problem with this system and need to make a change. NO! It’s not in the budget! We can deal with it later… probably won’t cause any trouble anyway! Hahahaha!!!”
Good Bye Chrysler you had a good run but the ****ing clowns running the show now have no damn clue!
05/19, 10:25 PM
posted by:
autonut
I don’t believe it is about Chinese parts. Actually, great number of components are coming from China and assembled here or in NAFTA zone to get right content label. But there are ways to cut prices: improving the process. Toyota knows manufacturing process of all suppliers and so does GM (after Lopez). Big companies are actully pretty good about process and smaller ones have something to learn. If supplier improves the process, they keep proceeds from improvement, based on vendor process they get fixed profit margin; not a great one, but they will profitable and stay in business.
05/20, 6:31 AM
posted by:
olds307
More parts from China and India? And this is what the government bailed out Chrysler 30 years ago for??
05/20, 10:41 AM
posted by:
Catiadesigner
The way Chrysler is treating its current suppliers it will have no choice but to get parts from overseas, on the last job I was involved in we had to change suppliers constantly because Chrysler were putting them out of business, the purchasing group wouldn’t pay them until months after the due dates.
unfortunately the management at chrysler is obsessed with cost cutting, at the expense of quality and everything else. Most of the engineers know what a good product needs but the myriad of people who have nothing more to do keep trying to cut corners and costs keep forcing last minute changes on the engineers to save points of a cent. Mention the phrase MCM (material cost management) to any Chrysler engineer and watch them shudder, the management get a bonus (another one) for hitting MCM targets even if it directly affects the quality of the vehicle in a negative way. The engineers are starting to rebel though, on the new ram tailgate I heard that the huge badge is set inti a depression in the tailgate to prevent some accountant from deleting or shrinking the badge, if anyone does, the costs associated with changing the stamping tools will be prohibitive. Maybe Chrysler should look at losing some of the 140+ highly paid “executives” they have on the books?
05/20, 1:10 PM
posted by:
DialM4Speed
“Maybe Chrysler should look at losing some of the 140+ highly paid “executives” they have on the books?”
Oh heaven forbid that their too important! It much easier to get rid of the union labor… ya know the people that ACTUALLY DO THE WORK!
05/21, 12:17 AM
posted by:
400horseSS
^Nice.
05/21, 12:25 AM
posted by:
400horseSS
cataidesigner, I told HemiRoadRunner (he sees my point) and others the same deal, management slashes and slashes until customers finally say **** this garbage ass car the management lay the smackdown on employee pay and benefits. Digusting!