Automotive News - August 25, 2008 - (Page 42) 42 • AUGUST 25, 2008 Survey: Suppliers reconsider business with Chrysler Jesse Snyder jsnyder@crain.com Suppliers are so worried about Chrysler’s future that many of them aren’t sure they want to continue selling parts to the company. This month, in a survey of 98 suppliers, almost half said they are reconsidering doing business with the privately held automaker. The survey was conducted for Automotive News by the consulting firm SupplierBusiness, of the United Kingdom. The survey also found that 87 percent of suppliers rated Chrysler’s longterm prospects as fair or poor, the worst among six global automakers. By comparison, 99 percent rated Toyota’s prospects as good or excellent. Suppliers ranked Chrysler worse than General Motors, Toyota, Ford, Nissan and Volkswagen on each aspect surveyed, including terms, speed of payment and suppliers’ trust in the commercial partnership. Forty-three percent of suppliers said they are less likely to offer new product technologies to Chrysler in the future, and 48 percent said Chrysler’s financial condition has made them reconsider doing business with the automaker. Toyota did best on these two survey questions. No supplier has reconsidered business with Toyota, and only one is less likely to offer new technology to the Japanese automaker. Edmund Chew, president of Sup- Chrysler qualms Suppliers in survey that are reconsidering doing business with Chrysler: 48% GM: 27% Ford: 24% VW: 7% Honda: 4% Toyota: 0 Source: SupplierBusiness survey for Automotive News plierBusiness, described the survey results as a slip for Chrysler but not catastrophic. “Chrysler is probably OK in the short term,” he said, “but it can’t let this trend continue in the medium term without causing itself damage. If you let this continue a few years, you can’t get the support you need from suppliers to develop competitive vehicles.” North American suppliers are increasingly concerned about lower demand for their products and the financial condition of their customers. Through July, Chrysler’s production is down 20 percent from the first seven months of 2007. Chrysler acknowledges it is slower to pay suppliers this year, going to 60 days from 45. Suppliers are less sure of Chrysler’s liquidity than they are of publicly owned automakers. Last summer, Chrysler stopped releasing financial results when the venture capital fund Cerberus Capital Management LP bought an 80.1 percent stake and took the automaker private. This month at the Management Briefing Seminars in Traverse City, Mich., Chrysler purchasing chief John Campi said Chrysler and its suppliers would need a “fierce collaboration” to slash $1,000 per vehicle in material costs within three years. But he pledged “equally shared benefits” and promised Chrysler’s procurement office would stabilize scheduling, reduce complexity and streamline change notices to make suppliers’ tasks easier. c David Barkholz contributed to this report CHRYSLER Campi takes firm stand with suppliers continued from Page 1 and tried to retrieve Chrysler’s plastic-making tools. cross & Judd LLP. Two of Smith’s supplier clients have sought help fending off warranty claims from Chrysler. Smith says it is nearly impossible to determine who is at fault in the cases. But Chrysler’s position, he says, is “ ‘we don’t care who is at fault, you will contribute; give us money if you want to maintain a parts relationship.’ “ The cost to customers for keeping Collins & Aikman afloat until the autumn of 2007 was more than $700 million, according to an Automotive News estimate compiled from court documents and interviews. Chrysler shouldered the biggest share among automakers of the loans and price increases that were never recovered. Ham-handed? Suppliers called the reaction excessive, even ham-handed. Plastech rushed into Chapter 11 bankruptcy protection to keep Chrysler’s tools and briefly withheld some shipments of plastic parts bound for Chrysler. But today, Campi says his handling of the Plastech case has been vindicated. He says Chrysler’s actions enabled the automaker to pay a fraction of what a bailout of the supplier would have cost. According to court documents in the Plastech bankruptcy case, Chrysler was looking at a bailout tab of between $60 million and $100 million. Plastech, with sales last year of $1.4 billion, was busted up and sold off in Chapter 11 this summer. “I’m not looking to kill suppliers,” Campi said after a speech at the Management Briefing Seminars in Traverse City, Mich. “I will work with every supplier I can in a collaborative fashion to help them become profitable and help us. “But we don’t have the wherewithal to prop up a supplier simply to keep them running. I won’t do it.” The blunt-talking Campi is playing out supplier disputes in a very public way. Since January, Chrysler Too costly A third client is dealing with demands by Chrysler for money back over an engine project for which the automaker thought it paid too much. Smith did not identify the clients. Chrysler says it is simply trying to protect its commercial interests. “Sometimes litigation is a logical course to resolve issues that cannot be resolved in the normal course of business,” said Chrysler spokesman Michael Palese. Chrysler declined to discuss details about how much the automaker saved by not helping bail out Plastech. But Cole, who sat on an advisory board at Plastech, says the supplier’s other customers leaned toward helping the company get through a cash crunch. But when Chrysler refused to participate, that made it too expensive for those customers to shoulder the full cost, he says. In the Plastech bankruptcy documents, Chrysler said its response was influenced by the accommodations it had made for Collins & Aikman Corp. after the supplier collapsed into bankruptcy protection in May 2005. Don’t push us Campi, a trusted longtime lieutenant of Chrysler CEO Bob Nardelli who moved into his job in January, says he is trying to improve Chrysler’s battered supplier relations. In Traverse City, he said Chrysler and its suppliers would need a “fierce collaboration” to slash $1,000 per vehicle in material costs within three years. But he pledged “equally shared benefits” and promised Chrysler’s procurement office would stabilize scheduling, reduce complexity and streamline change notices to make suppliers’ tasks easier. But in an interview minutes later, Campi warned suppliers not to demand faster payment for parts. “If a supplier wants to push us because of their fear, then they are violating the contract in place, and I will take the necessary action,” he told Automotive News. He acknowledged some suppliers had threatened to stop delivery of parts to Chrysler. “And I say, I’m not going to let you shut down production,” Campi said. “If you’re serious about this, you have to live with the legal consequences.”c JOE WILSSENS Chrysler purchasing chief John Campi, on the job since January, says he is trying to improve the automaker’s battered supplier relations. has sued two of its largest suppliers over disputes that almost certainly would have been resolved quietly in years past. This month, Chrysler sued Johnson Controls Inc. for what it says were $15 million in overcharges for materials used in batteries. With a $40 billion annual purchasing budget, that is barely a rounding error at Chrysler. International Inc. over seat recalls that occurred in 2005, two years before Cerberus Capital Management LP acquired a controlling stake in Chrysler. As Chrysler’s largest single supplier, Magna sold $3.33 billion in parts to the automaker in 2007. Industry analyst Dave Cole says Chrysler is under so much financial pressure from Cerberus that it is willing to risk bad blood with even key suppliers to maintain liquidity. “It’s hardball,” says Cole, head of the Center for Automotive Research in Ann Arbor, Mich. “We’re in an era where you might have to take some risks that you normally wouldn’t want to take.” Chrysler’s lawsuits reflect an unrelenting quest for cash, says Fred Smith, an attorney with Warner Nor- ‘It’s hardball’ Yet, Chrysler is publicly taking to task the company that makes seats and interiors for some of its most important models, including the Jeep Grand Cherokee and the redesigned 2009 Dodge Ram pickup. In a court response, Johnson Controls denied the allegations. In February, Chrysler sued Magna LENDERS Domestic captives’ shares shrivel continued from Page 1 in the five states served by Southeast Toyota Distributors LLC. AutoCount estimates World Omni has a 0.75 percent U.S. market share. Finance rates In the first six months of this year, Toyota Financial says it financed about 58 percent of new Toyota, Lexus and Scion vehicles sold at U.S. dealerships. In the same period, GMAC says it financed about 46 percent of new GM cars and trucks sold in North America. GMAC declined to separate U.S. and Canadian sales data. AutoCount bases its lender rankings on registration data from state motor vehicle departments, including the names of lien holders. Four states and the District of Columbia do not provide lender information, the company notes. The 10 largest lenders in the AutoCount study include six captives and four independent banks. The captives of GM, Ford Motor Co. and Chrysler LLC traditionally have led lists of U.S. auto lenders. But in the past three years, the domestic captives’ market shares have eroded as Detroit 3 new-vehicle sales have declined. At the same time, import-brand captives’ shares of the U.S. finance market have grown. Rapidly rising fuel prices and a slumping U.S. econ- omy have accelerated the trend this year, as buyers have turned to fuelefficient vehicles and away from the big trucks that have been Detroit 3 profit centers. Dealer relations Mike Groff, group vice president of Toyota Financial, says his company is “spending a lot of time building our relationships with our dealers through a lot of different programs. “Our share has been increasing over the las
Table of Contents Feed for the Digital Edition of Automotive News - August 25, 2008 Automotive News - August 25, 2008 Looming cuts worry L-M dealers Bad blood Study: Toyota top U.S. lender How the kid got in the picture Hyundai affiliate to build transmission plant White House names acting NHTSA chief S&P lowers outlook on Sonic, Group 1 Now you can talk back: Join our online community Dodge dealers: We're in a box Company gets a fix-it list for pickups, SUVs from J.D. Power Mahindra delays U.S. launch Dealer Beyer now selling a 2009 Obama Nissan to leap into U.S. commercial-truck fray in 2010 China's Brilliance to show cars in Detroit Lawsuit alleges insider trades by CarMax execs Honda: Dealerships will have Fits more than a month early Infiniti's stylish stretch Cadillac will offer 4-cylinder sedan in '10 Chrysler redesigns new design boss' spot in exec ranks Genesis aims at low-priced luxury Letter to the Editor It's show and tell for auto industry in Washington Price cuts both ways The love affair continues Advance ads cost a lot, but help little Dealer-customer mandatory arbitration works Lithia sheds 2 of its Detroit 3 stores Japan sales slide; output, exports keep expanding L.A. dealers split on taking thumbprints of buyers Picture This With redesigned TL, Acura adds power, awd Personnel Chevrolet adjusts plans for coming decade GM revamps its vehicle lineup to succeed in a changed world Caddy relies on model updates over product development Buick buzzes about China Dismal sales make future of Hummer uncertain Budgets may crimp the lineup at Saturn Dreams aside, Pontiac will rely on small fwd cars Will GMC overhaul truck offerings? GM downsizes product lineup GM's powertrain plan: Less weight, better technology Hummer hopes pickup brings new buyers Dealers 'Ambush' boosts GM Certified DealerTrack adds market price checks Wholesale used-vehicle prices inch up in July Mexico sales up 2.6% in July; '08 near pace of '07 Collectors revive GM classics Honda's new Fit subcompact: Bigger, sportier Survey: Suppliers reconsider business with Chrysler Web site offers vehicle listings from Detroit 3 Nissan trains inspectors to improve quality A bumpy ride for dealer/lawmaker Buchanan Detroit dealers duel over bulk mailing Story links Nissan suicides, work pressure Times change, but supplier talk doesn't Garbage in, good stuff out Creed's creations Automotive News - August 25, 2008 Automotive News - August 25, 2008 - (Page Intro) Automotive News - August 25, 2008 - (Page BRC1) Automotive News - August 25, 2008 - (Page BRC2) Automotive News - August 25, 2008 - Study: Toyota top U.S. lender (Page 1) Automotive News - August 25, 2008 - Study: Toyota top U.S. lender (Page 2) Automotive News - August 25, 2008 - Dodge dealers: We're in a box (Page 3) Automotive News - August 25, 2008 - Nissan to leap into U.S. commercial-truck fray in 2010 (Page 4) Automotive News - August 25, 2008 - Nissan to leap into U.S. commercial-truck fray in 2010 (Page 5) Automotive News - August 25, 2008 - Cadillac will offer 4-cylinder sedan in '10 (Page 6) Automotive News - August 25, 2008 - Cadillac will offer 4-cylinder sedan in '10 (Page 7) Automotive News - August 25, 2008 - Genesis aims at low-priced luxury (Page 8) Automotive News - August 25, 2008 - Genesis aims at low-priced luxury (Page 9) Automotive News - August 25, 2008 - Genesis aims at low-priced luxury (Page 10) Automotive News - August 25, 2008 - Genesis aims at low-priced luxury (Page 11) Automotive News - August 25, 2008 - The love affair continues (Page 12) Automotive News - August 25, 2008 - The love affair continues (Page 13) Automotive News - August 25, 2008 - Dealer-customer mandatory arbitration works (Page 14) Automotive News - August 25, 2008 - Dealer-customer mandatory arbitration works (Page 15) Automotive News - August 25, 2008 - Lithia sheds 2 of its Detroit 3 stores (Page 16) Automotive News - August 25, 2008 - Lithia sheds 2 of its Detroit 3 stores (Page 16a) Automotive News - August 25, 2008 - Lithia sheds 2 of its Detroit 3 stores (Page 16b) Automotive News - August 25, 2008 - Japan sales slide; output, exports keep expanding (Page 17) Automotive News - August 25, 2008 - Japan sales slide; output, exports keep expanding (Page 18) Automotive News - August 25, 2008 - Japan sales slide; output, exports keep expanding (Page 19) Automotive News - August 25, 2008 - Picture This (Page 20) Automotive News - August 25, 2008 - Picture This (Page 21) Automotive News - August 25, 2008 - Picture This (Page 22) Automotive News - August 25, 2008 - With redesigned TL, Acura adds power, awd (Page 23) Automotive News - August 25, 2008 - Personnel (Page 24) Automotive News - August 25, 2008 - Personnel (Page 24a) Automotive News - August 25, 2008 - Personnel (Page 24b) Automotive News - August 25, 2008 - Personnel (Page 24c) Automotive News - August 25, 2008 - Personnel (Page 24d) Automotive News - August 25, 2008 - Personnel (Page 25) Automotive News - August 25, 2008 - GM revamps its vehicle lineup to succeed in a changed world (Page 26) Automotive News - August 25, 2008 - Caddy relies on model updates over product development (Page 27) Automotive News - August 25, 2008 - Budgets may crimp the lineup at Saturn (Page 28) Automotive News - August 25, 2008 - Budgets may crimp the lineup at Saturn (Page 29) Automotive News - August 25, 2008 - Dreams aside, Pontiac will rely on small fwd cars (Page 30) Automotive News - August 25, 2008 - GM downsizes product lineup (Page 31) Automotive News - August 25, 2008 - GM's powertrain plan: Less weight, better technology (Page 32) Automotive News - August 25, 2008 - Dealers (Page 33) Automotive News - August 25, 2008 - Wholesale used-vehicle prices inch up in July (Page 34) Automotive News - August 25, 2008 - Wholesale used-vehicle prices inch up in July (Page 35) Automotive News - August 25, 2008 - Wholesale used-vehicle prices inch up in July (Page 36) Automotive News - August 25, 2008 - Wholesale used-vehicle prices inch up in July (Page 37) Automotive News - August 25, 2008 - Wholesale used-vehicle prices inch up in July (Page 38) Automotive News - August 25, 2008 - Mexico sales up 2.6% in July; '08 near pace of '07 (Page 39) Automotive News - August 25, 2008 - Collectors revive GM classics (Page 40) Automotive News - August 25, 2008 - Honda's new Fit subcompact: Bigger, sportier (Page 41) Automotive News - August 25, 2008 - Survey: Suppliers reconsider business with Chrysler (Page 42) Automotive News - August 25, 2008 - Survey: Suppliers reconsider business with Chrysler (Page 43) Automotive News - August 25, 2008 - Nissan trains inspectors to improve quality (Page 44) Automotive News - August 25, 2008 - Nissan trains inspectors to improve quality (Page 45) Automotive News - August 25, 2008 - Creed's creations (Page 46) Automotive News - August 25, 2008 - Creed's creations (Page 47) Automotive News - August 25, 2008 - Creed's creations (Page 48)
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