Tata Consultantcy Services may regret their contract to take over Chrysler's information technology (IT) services. Automotive News [sub] reports that Chrysler "asked its non-production suppliers for a 5 percent across the board cost reduction" effective June 1 and effective for one year. "Non-production suppliers" are those providing IT, administrative, custodial and other support services not directly involved with producing automobiles. A statement from Chrysler explained their "recent decision to enact a 5 percent cost reduction on non-production materials and services is part of Chrysler's ongoing efforts to reduce its cost footprint in a highly competitive marketplace." From what we've seen, these "ongoing efforts" also include stiffing delaying payments to some suppliers and asking others to take a 25 percent cost cut. Some of these beleaguered suppliers can't take beatings like this much longer before they follow Plastech into Chapter 11. But maybe that's what Cerberus wants, because it would give them an excuse to take Chrysler in the same direction.
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As the price of the raw materials increase – Chrysler asks Suppliers to drop prices. Sounds completely fair and realistic b/c we all know the Suppliers are what is holding the D2.8 back from returning to greatness. Or the recession, currency manipulation, economy, tree huggers, politicians, perception, etc., etc., etc.
How is this going work in the long run? Very soon vendors will be requiring cash on the barrel head.
May car sales for Chrysler LLC are down 33% and trucks sales are down 22%. Will payments to suppliers be cut accordingly?
I hope they tell Chry-baby to pound sand.
For many (most) ChryCo suppliers – they had to take what was offered; their businesses depended on it. Tata is another story. Sure, they want the business, but they were doing fine before they signed up Chrysler – and they’ll be fine if they take a pass on this latest, non-negotiated contract amendment.
With most of the IT Staff heading for the exits what would be the fallout if Tata said ‘No thanks, contract stands as it…’ Could they take back these outsourced functions, even if they wanted to?
Indian companies are starting to truly become global in nature and are slowly learning how to operate in different markets. ChryCo is feeling them out to see if they want to play that most American of all pastimes Hardball.
Nardelli sure is doing a swell job so far…
Any large diversified company that is not exposed to the auto industry is just going to laugh at them.
GM recently tired to play a game like this with my employer. AFAIK after they were told pay the contracted amount or service stops on X date they coughed up.
The lousiest part about it is that the announcement is the only time Chrysler will mention it to anyone. All they do from her on out is reduce their payments for all PO’s received. As a supplier, you have no recourse for the lost revenue. It’s just gone.
The only retaliation any supplier has is to no quote future Chrysler business. Unfortunately, many of them depend on Chrysler for more than 50% of their current business so that’s not a real short-term fix.
It’s kinda like watching someone try to bail water out of a sinking boat with a thimble…