Loose lips can sink supplier-carmaker relationships

Chrysler CEO Sergio Marchionne wants some of the profits that suppliers are getting. It was impolitic of him to assert so bluntly this month that suppliers' healthy profits make his "blood pressure go up." However, he identified a real need. Chrysler needs higher profits to stay competitive globally.

But Marchionne risks wrecking the modest improvements in supplier relations Chrysler has made since Dan Knott became head of purchasing in 2009. And Chrysler needs the good will of suppliers when they decide which customers get the newest technology first.

Marchionne must realize that suppliers have more clout than they did before the recession, and a partnership approach now works best. Suppliers also must be compensated properly to justify their enormous investments to develop the technology Marchionne wants.

Automakers can't squeeze parts makers the way they did back when the automakers controlled advanced technology. Now, a tech-savvy supplier that has developed a new feature decides which customer gets it first. These days in negotiations, suppliers often have the hammer.

Almost immediately after his rash remarks, Marchionne softened his message. He warned against reviving past "aggressive behavior" toward suppliers. That's wise.

Chrysler suppliers are so profitable precisely because their parts helped fuel the automaker's rapid sales growth. Those suppliers' profits also signal that Chrysler is no longer last in line with them.

Both sides should use Marchionne's remarks to widen the conversation. And they should skip squabbling over past profits to explore what fresh successes they can work on together.



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