AKRON (Jan. 27, 2010) — Chrysler Group L.L.C. had earned the dubious honor of being just about the worst customer in the auto industry as far as suppliers are concerned. That may change soon.
Before the end of the month, the struggling auto company expects to roll out a series of actions to improve its relationship with suppliers. The “new way” will include paying some suppliers upfront for expensive engineering, design and development work on certain programs; resolving payment claims at a faster pace; and changing how suppliers are paid during the life of a vehicle program—to large, scheduled payments rather than a per-piece basis.
Chrysler isn't doing this because it's the “right” thing. Rather, management has realized many automotive suppliers are leery about doing business with a company with a rotten track record that went through bankruptcy. With new Fiat platform cars coming into the fore, a secure supplier base is a must.
As the head of Chrysler purchasing put it, “It's no fun to work in a business where you're fighting your supplier base. We need a healthy supplier base.”
True words, indeed.
Automotive suppliers always have been at the beck and call of the auto manufacturers. The tradeoff for high-volume business has been to accept customers who act arbitrarily and in a self-centered manner, are quick to pass costs down to the suppliers and make extreme demands, while cutting their stable of vendors at the same time.
Many bankruptcies among automotive suppliers spring from actions by their auto customers.
The disruption caused by the collapse of the auto market, and the bankruptcies of Chrysler and General Motors Co., have created a new structure for the automotive industry. Vehicle makers may finally be recognizing the importance of their suppliers.
GM, for example, is promising to share savings it achieves with its suppliers. Now Chrysler, the worst of the worst, seems to be coming around.
It's time the long-promised partnership between auto makers and their suppliers becomes a reality.
This editorial appeared in Rubber & Plastics News, an Akron-based sister publication of Tire Business.