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"It is disappointing to find that the media can’t seem to get the message straight. So, let me set the record straight. Not once in any public or private discussion have I ever suggested that suppliers would have to reduce pricing to meet the 25% cost out challenge without our mutual objective of protecting their profitability in dollars and percent. Our drive for cost reduction will only be accomplished with collaboration between Chrysler and our supply base. That simply cannot happen if it is not mutually beneficial.
This is really simple. First, I want to take cost out of what is incurred by us and our supplier (25 percent target). Secondly, I want to share equally with the supplier on each stepalong the way. Schedule stability should drive significant savings for the supplier – potentialestimate of eight percent. So, after stable orders can be demonstrated, our supplier would saveapproximately 8 percent — giving us 4 percent and increasing their profits by approximately4 percent.
In summary, aprogram that suggests that we will take the savings without having driven the cost out is doomed to failure before launch. That would be just another typical cost reduction effort that puts the burden on the suppliers without regard to the obligation we have as OEMs to find mutually beneficial solutions. I personally refuse to play that game. It simply will not help the survival of this once great American industry."
John Campi
Chief Procurement Officer, “not czar” Chrysler LLC
16 Comments on “Chrysler Cost Clarification: Stepalong Cassidy Rides Again!...”
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Ya right.
I was born, but it wasn’t yesterday. I am not a fan of Consumers Report, but Chrysler products did not get great ratings.
John, would you like me to send you a copy?
See, I have this really neat equation, see, and I put this complete “pulled it out of my butt” guess right in the middle of it, see, and if you look carefully, see, the numbers all add up on both sides of the equation, see, so it must be a good business plan, see, because all of the numbers work out exactly. Any questions?
Um, didn’t you just pull a number out of your butt?
Yes, and?
Never mind. I guess costs can be cut by 25%. I just didn’t go to enough MBA finance classes to fully understand.
Was this in response to the TTAC article or just the general press reporting on this topic? If it was responding directly at TTAC I think the snarky headline wasn’t called for. I mean, even if he’s feeding us a line he should get a bit of respect for responding to TTAC. However, if he’s just issuing a general press release, who cares?
It looks like someone is a secret TTAC reader….
This is really simple. First, I want to take cost out of what is incurred by us and our supplier (25 percent target). Secondly, I want to share equally with the supplier on each stepalong the way. Schedule stability should drive significant savings for the supplier – potentialestimate of eight percent. So, after stable orders can be demonstrated, our supplier would saveapproximately 8 percent — giving us 4 percent and increasing their profits by approximately4 percent.
Huh? So we want a 25% cost reduction and you will make an additional 4%. Is that what he just said or am I totally confused?
beetlebug:
Was this in response to the TTAC article or just the general press reporting on this topic?
This is the official clarification from Chrysler via their firehouse blog. We received a notification of Mr. Campi’s response to press reports on his new cost-cutting initiative. As we’re amongst those criticizing Mr. Campi, I felt obliged to reprint the release verbatim.
I think the 8% which is shared between parties at 4% each is an example of smart initiatives all of which add up to 25% target, assuming they have enough other good ideas in the hopper.
Maybe the cars aren’t so great, but his story makes sense to me, from my distance. Is he new, or an old timer, hated by suppliers?
Plastic is made from oil. Unless ChryCo’s suppliers have their own wells, it’ll be a cold day in Saudi Arabia before 25% cost savings are realized.
So to get 25%, they have to take 50% out. Name me one part that has that type of margin?
Sorry, I just found the answer. Tower, Delphi, American Axle, Dura, Federal-Mogul, and Plastec just to name few, have that type of margin to “share” with Chrysler.
Again, Mr. Campi is demonstrating a lack of insight into the supply base he is being paid to manage.
Even a cursory review of supplier cost structures would reveal that there is nothing like an 8% line item to cover something I suppose must be called “schedule instability” which would magically disappear on the mere assurance of “schedule stability”. To back the logic up one step further, his assertion that this kind of money is there to be harvested implies that incumbent suppliers must have originally won the business (in a cutthroat industry where Tier I suppliers gouge one another’s eyes out for two cents) with this mythical 8% cushion built in.
As I said in my posting for the original article, this is a 5 point business on a good day. If Mr. Campi is sincere about working with the suppliers, he should start out by doing some basic homework. Furthermore, if he wants to endear himself to the OE suppliers who have have worked tirelessly and creatively to lean out their businesses in order that they, and by extension their customers, could survive, he should reconsider any commentary which includes the sentence: “This is really simple”.
Because, Mr. Campi, it sure as hell isn’t.
Somebody get this guy a new keyboard, his spacebar is broken. Or is that part of the 25% savings?
“As we’re amongst those criticizing Mr. Campi, I felt obliged to reprint the release verbatim.”
As an honorable journalist will do. Thanks!
As for Mr. Campi, this gig at Chrysler is probably the best-paying job he’s ever had. That’s the good part. The bad part is Bob Nardelli is his boss. So I think Campi is dutifully playing the role demanded of him. Those 25% savings on parts costs won’t be realized, but until the denouement occurs Campi gets to wear his head rather than having it put on a pike by the castle entrance.
I couldn’t help but note that he said nothing denying that they are pushing their suppliers to go off shore. Then, in the end, he talks about survival of the once great American industry.
I guess they want to save the industry, but not have it still be American. I have no problem with that, except that they won’t come right out and say it.
50merc :
As for Mr. Campi, this gig at Chrysler is probably the best-paying job he’s ever had. That’s the good part. The bad part is Bob Nardelli is his boss. So I think Campi is dutifully playing the role demanded of him.
I note he is a Home Despot veteran, so it may well be that he is a trusted lackey of Nardelli.
If Campi “was disappointed the media could not seem to get the message straight”, perhaps he needs to take more care in his press releases.
Schedule stability should drive significant savings for the supplier – potentialestimate of eight percent.
Hmmm. I wonder exactly how this is supposed to work? If the ‘dog weren’t doing a fine impression of “the ever shrinking dog”, I could understand his assertion. However, given the direction Cryslerbus appears headed, I would have to think it the height of insanity to not cut their estimates around 75-60%, and bid the price on that volume. Still, I do not see it as a hedge against commodity costs, even in a foolish “lets make a year long buy now” type of deal.
And, finally, is the ‘dog doing anything about simplifying their parts inventory? That would be a cost savings right there, but it would require an engineering investment I don’t see Cryserbus as willing to do.
Bruce
It seems the honest part of that statement is “this once great American industry.”
Someone will make money building cars in the US, it was never going to be pretty getting Chrysler to that point but I would have thought that the weak dollar, higher transportation costs and supply chain efficencies mean offshoring is unlikely for Chrysler’s direct suppliers?
@thalter :
It looks like someone is a secret TTAC reader….
While TTAC covered it, this site wasn’t the only one that did. Automotive News picked up the initial coverage of the issue (as far as I am aware) on the cover of this week’s issue.
Anybody with half a brain saw that a 25% component cost reduction in a time of rising raw material prices is a pipe dream, or a sure ticket to supplier bankruptcy or suppliers turning down Chrysler’s office of doing business with them because doing so means certain losses.