Just four days after Plastech's parts embargo shut down Chrysler factories, just eight days before the two companies' interim agreement is set to expire, Chrysler's CEO is deploying the same sort of charm offensive that made him so popular at Home Depot. "This was not hard-ball tactics, it was a solid business practice," Nardelli told reporters at the Chicago Auto Show. "We never meant to create an adversarial relationship with Plastech or any other suppliers." In other words, hey, it's just business. "We have to stay competitive. Our customers expect that. Obviously if [Plastech's] not financially sound, we certainly aren't in the business of subsidizing. No hard feelings, no animosity, just solid business practices." No subsidizing eh? The Detroit Free Press reports that Chrysler resolved the Plastech missile crisis by agreeing to pay some its bills "early;" an undisclosed portion of a $23.4m early payment cash infusion. It's a dangerous precedent that could consume Chrysler's cash pile. Meanwhile, Nardelli says Chrysler will continue to remove its parts contracts from Plastech. Somebody send that man a copy of "How to Win Friends and Influence People," STAT.
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I bet that “early payment” was net 30 days per the original agreement, and not the 120 days that Chrysler drags out to their suppliers, even in the best of times.
“We have to stay competitive. Our customers expect that”
I don’t think that Enterprise, Thrifty, Alamo, et al are too worried about how competitive Chrysler’s products are, so long as they have excellent fleet rates.
Just more evidence that this guy and the Cerberus team have not got a clue what they are doing.
By the way, shopping in Home Depot is fun again now that they have gotten rid of Nardelli. The employees actually are friendly and helpful again after years of hiding in the corners grumbling.
The 2.8 have driven their suppliers into bankruptcy. No hard feelings, eh?
As you and Justin alluded to in a podcast this will become a trust and confidence issue with Chrysler. If everyone starts making a run for the bank, everyone else will have to follow for fear of not having any money left over for themselves.
But yeah, this underlines a fundamental misunderstanding of how tightly coupled the links in supply chains are for car-makers – as opposed to hardware, where ordering cheap stuff from China can easily be sourced in hundreds of places.
Oh and…
Obviously if [Plastech’s] not financially sound, we certainly aren’t in the business of subsidizing.
Like Chrysler has the right to say anything here.
“Obviously if [Plastech’s] not financially sound, we certainly aren’t in the business of subsidizing.”
Nardelli added, “Uncle Sam, we’re a little financially unsound, would you mind subsidizing us?”
How does paying for parts delivered fall under being subsidized. Sounds like a debt owed that Chrysler is obligated to pay and pay ON TIME.
I know what it’s like to have your POS clients not pay on time or think they don’t have to pay because they think they are God’s gift. It hurts eveyone in the company with the cash flow problems it generates and hurts your work for the people who pay on time.
Plastech should diversivy or find some new OEM’s and pull the rugg out from under Chrysler.
By the way, shopping in Home Depot is fun again now that they have gotten rid of Nardelli. The employees actually are friendly and helpful again after years of hiding in the corners grumbling.
GE workers are probably glad he’s gone too. You can see the GE Way in these actions. I think Neutron Jack thought Bob was too tough even for GE, that’s why he chose Immelt over him.
Nardelli is a liar of the first order – these are the facts:
1 plastech didnt miss a shipment and never threatened to
2 chrysler pulled there contract with no bank of parts, just to make sure they could shut the plants.
3 plastech had no intention of filing bankruptcy, the chrysler decsion to breech/pull the contracts and cancel purchase orders friday caused the filing.
4 plastech made money last year without “being subsidized”
nardelli should be fired for the millions he’s cost chrysler stockholders,the thousands of jobs he s lost and the overall damage to the economy – for no good reason – no cheaper parts, no better cars………no good reason
That’s really insulting that Nardelli considers that Chrysler “subsidizes” its suppliers. Imagine the gall of a supplier wanting to be paid for its goods in a reasonable period of time, and needing to make a profit on its products.
Starving your suppliers may be a good short-term strategy but in the long run you’ve got to have a relationship that promotes the interests of both parts buyer and supplier. I think the Japanese companies are much more attuned to this reality than the American ones. Maybe some of the obvious difference you can see between the interior of a Sebring and an Accord says something about the virtues of having a parts supplier that views its customer as a partner rather than an enemy.
Anybody know who Chrysler selected as the new parts supplier?
J,
The attitude does seem to be better at Home Depot, but I can rarely FIND an employee anymore. Also, signage and labeling has gone from bad to non-existant.
Fascinating comments about this facedown at the excellent “View Through the Windshield” blog. Joe Sherlock, the blogger, actually owned a plastics company and knows how suppliers can get into bare-knuckles struggles with deadbeat creditors. One tidbit that started me: “New tooling is not an option here – a set of taillight molds for a particular vehicle may cost $300,000 or more. And take months to make.)”
Looks like Plastech had Chrysler by the short hairs.
maycoo and decoma are the two main suppliers chrysler selected – maycoo is a joke there equipment is old and they can barely mold black parts let alone mold in color interiors – chryslers quality will go way down – decoma/magna is solid but they agreed to take parts at current pricing which is under water, how long will that last?
50Merc:
In the case of the company I work for, the molds are owned by the customer (Pontiac, Subaru, Toyota, Honda, Mitsubishi, Chrysler, etc). When the company agrees to make the parts, they agree to a certain number of years in full production, then a certain number of ‘owed-service’ years.
Even so, it takes months to get machine conditions and fit/finish issues resolved before you can enter full production, so Chrysler is blowing a lot of smoke. Anyway, I can’t imagine that Plastech will lose money anywhere near the rate that Chrysler will during a work stoppage.