Open line

Peter Rosenfeld
Title: Vice president, worldwide procurement and sourcing strategy, DaimlerChrysler
Age: 44

Education: Bachelor’s degree in foreign service, Georgetown University; master’s degree in management, Northwestern University

Career: Joined Chrysler Corp. as advanced vehicle financial analyst in 1982; became a purchasing agent in powertrain components in 1987; named executive of minivan platform procurement and supply in 1992; became director of New Generation Vehicle platforms in 1995; named executive director of quality and technology development in 1998; became vice president of procurement and sourcing strategy in 1999

Peter Rosenfeld is vice president of worldwide procurement and sourcing strategy at DaimlerChrysler. As the automaker struggles with trying to stop the flow of red ink, Rosenfeld faces many challenges.

DaimlerChrysler is abandoning past principles, dumping the tradition of favoring an existing part supplier with the contract to supply the part on a next-generation model. Also gone: The practice of pre-selecting a supplier before settling on the technology that will be incorporated into a vehicle.

These are not the first major changes. Late last year the company demanded 5 percent price cuts from suppliers, and then informed them they must deliver 10 percent more in the next two years.

Automotive News talked with Rosenfeld at DaimlerChrysler’s office in Auburn Hills, Mich., on Sept. 26 to discuss these and other issues.

Describe the state of relations between DaimlerChrysler and its suppliers.

I want all of our suppliers to know where they stand with us in terms of their performance, for cost, for quality, for delivery and for technology. I’m a big believer in open communication and sharing data with our suppliers.

We need to come up with an all-star team every time we select new suppliers. If you were the all-star last year, that doesn’t automatically mean you’re the all-star next year. But it is fair to say there is a halo effect. There is a certain halo associated with the all-stars from the last voting period to the current voting period. And for those suppliers who perform in an excellent manner, we’ll look to past performance. If the suppliers performed in an excellent way, the supplier rightfully has a certain advantage because of that. But that’s not an automatic. You don’t automatically go to the next program simply because you are the incumbent.

What drove you to realize you needed a change from the Extended Enterprise model of working with suppliers?

I don’t know if it’s so much of a need to change, but a recognition that we were a different company than we were in the last decade. And the company we are now is one that, when you accumulate the total purchasing, is in excess of $100 billion. We have a greater exposure to alternative suppliers, alternative technologies and alternative competitors.

The merger of Daimler and Chrysler was viewed as cataclysmic in the supplier world. Was that a concern as you were looking at changing the procurement model at Chrysler?

I can understand why it’s a concern to suppliers. It is a concern to us. But the reality is if you keep doing what you’ve done, you keep getting what you got. We’re not the same company any more.

But I don’t view it as the glass half empty. I view it as the glass half full. It’s a great opportunity for suppliers that do well with us to grow and to grow at a faster rate than they otherwise might have with just the Chrysler Corp. alone.

One of suppliers’ chief concerns is about proprietary technology and you taking their ideas and shopping them around. Can you guarantee to the supplier community that is not going to happen?

That is contrary to our ethics. It’s contrary to our approach. I don’t endorse it.

How many suppliers still talk about the plan announced last year for an immediate 5 percent price cut and an ongoing 10 percent cut for the next couple of years?

This program is really an evolution of SCORE (Supplier Cost Reduction Effort). It is about continuous improvement, and we’ve changed the name from SCORE to Material Cost Management. It is still founded in continuous improvement, but we want the supplier community and the Chrysler family to know this is not solely the responsibility of the supply base. Material Cost Management is the responsibility of the extended enterprise. It includes the supplier but is not limited to the supplier.

Are the cost reduction goals being handled case by case?

There is a misperception that 10 percent is a requirement or a goal that has been put on the back of the supplier. That’s not the case. That’s a key difference between MCM and SCORE. Instead, what we’re telling our suppliers is, “Look, we’re looking for you to generate excellent continuous improvement ideas that reduce costs. We aren’t measuring you to a specific goal any more. We are measuring you relative to your competitors in a given arena.” And so we will be sharing with our suppliers how they are performing in participation in MCM relative to their competitors. Then it’s their choice.

Our suppliers will know where they stand. A significant difference is that we are measuring our suppliers based on ideas that they present to us that we think are excellent ideas. It’s up to us to bring those across the finish line together with the supplier.

To implement these new ideas, will you send your people into suppliers’ plants? What kind of demand does that put on your resources?

There are not enough resources to do everything you would like to be able to do. And what we tell our folks in terms of resources is that we all have to learn how to juggle multiple balls in the air. It’d be really easy to do one at a time.

Each one of our people is responsible for making sure these products are moving forward as well as achieving the continuous improvement activities we have on current vehicles. We have to do both. So we’re striking that balance given the resources we have.

How would you describe the health of your supply base?

I think there’s a large group of our suppliers that are healthy. There is a portion of our supply base that isn’t so healthy. In both cases we work with our suppliers. Our goal is to be mutually profitable. There’s no pride in seeing members of our supply base in poor financial situations. Our approach to working with those suppliers who aren’t doing well is to try to work with that supplier.

Are you monitoring service work at your dealerships to target potential product liability issues?

Our view of supplier quality includes the development of the components up to point of launch. It includes the manufacture of those components that go into our volume production system. And for us, supplier quality involves monitoring of warranty as it is related to components, the goods and services our suppliers provide to us. And we have measures that we use with our suppliers in terms of supplier performance for their goods and services in the field. That folds into how we evaluate suppliers and give supplier ratings in terms of cost, quality, delivery and technology.

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