Chrysler says it saves $1,000 per vehicle

DETROIT - Chrysler group has slashed an average $1,000 off the production cost of each vehicle through savings in components and manufacturing, according to the company's chief ax wielder.

The savings made in the past six months 'give us a leeway to price a little lower,' said Wolfgang Bernhard, COO and the executive charged with cutting costs.

Bernhard said a large portion of the $1,000 has come from the group's program to cut the cost of components by 5 percent in 2001. But it also has involved engineering changes and redesigns of components made with suppliers.

'On the fixed-cost side, we will more than exceed our targets, so this means we can go into the market and protect our margins.'

He said the $1,000 per vehicle savings have not been achieved by decontenting vehicles. 'We are not doing that. We are lowering manufacturing and material costs.'

Long way to go

Robert Hall, professor emeritus at Indiana University and a manufacturing expert, said a $1,000 per vehicle reduction 'is an impressive number.'

'Their plants did have a way to go to be competitive with the best Ford plants, and they're very far away from the Japanese in efficiency,' he said.

Bernhard said the savings have enabled Chrysler to avoid some rebates and incentives. The Jeep Liberty, for instance, launched this year, has no consumer or dealer rebates or incentives - unlike competing products from Ford Motor Co. and General Motors, he said.

Bernhard said the average savings on the Liberty are lower than $1,000. DaimlerChrysler executives have said lowering the costs on Liberty, estimated to be about $2,000 higher than targeted, will be a major priority in the 2003 model year.

The Dodge Ram, the second new vehicle introduced under the German management team headed by Dieter Zetsche, also has been priced aggressively. Ram pricing was released on Aug. 1. With a base price of $17,670, including a destination charge of $715, the 2002 Ram costs about $120 less than the comparable 2001 model, the company says.

Chrysler group said a typically equipped Ram Cab 4x2 will cost $18,865, $925 less than the comparable 2001 model and $313 less than a similarly equipped 2002 Chevrolet C1500 4x2.

Plant costs drop

Manufacturing savings also have enabled Chrysler group to expand production of the popular PT Cruiser at its Toluca, Mexico, factory. Despite long buyer waiting lists, the decision to boost PT Cruiser production by 80,000 units wasn't made until three months ago. The initial cost estimate for a new paint shop in Mexico was $525 million, Bernhard said. 'We couldn't spend half a billion dollars for a paint shop to make 80,000 extra units.'

By working with suppliers, Chrysler whittled the budget to $300 million and the project was approved.

Other savings have come by lowering tooling costs. In late July, Chrysler put the tooling contract for a new vehicle out for bid on Covisint, the auto industry's Internet purchasing service.

Chrysler wanted to pay 30 percent less than for the original tooling, but the bids came in an additional 20 percent lower, said Bernhard, declining to disclose the vehicle or production dates. 'We are saving almost 50 percent on that tooling. This is a new world for us.'

You can reach Diana T. Kurylko at dkurylko@autonews.com

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