LAS VEGAS - Navistar International Corp., taking a page from Chrysler Corp.'s 'extended enterprise' play book, is thinning supplier ranks and building long-term partnerships with key components makers.
Forging closer ties with suppliers is a centerpiece of Navistar's plan to increase its share of the medium- and heavy-duty truck market. In heavy trucks, the Chicago-based company is increasing production, looking for better-than-expected 1997 industry sales, and setting ambitious market-share goals.
Navistar now has 1,000 parts suppliers, but would like fewer than 400 by 2002, said Don DeFosset, president of the truck group. Earlier this decade, Navistar had more than 3,000 suppliers.
He said the company is using Chrysler as a model, striving for close ties with a select number of key components suppliers. As with Chrysler, Navistar also wants suppliers to take part in the design and development of vehicles. Early involvement with suppliers will help Navistar improve the quality and reliability of its vehicles, he said.
'We truly do want to have long-term relationships,' DeFosset said. 'This isn't based on a 12-inch stack of documents. It's more like a handshake agreement in nature.'
By depending on a smaller group of suppliers, Navistar also hopes to simplify its manufacturing operations and reduce inventory costs. As part of its simplicity push, Navistar in October introduced what it calls the Diamond SPEC ordering system for heavy-duty trucks. Customers formerly had to sift through more than 100 separate option decisions; now they can choose from a simplified menu of options packages in 11 categories.
Navistar said it can deliver truck orders up to 50 percent faster with the new system.
In February, dealers used Diamond SPEC for 95 percent of stock orders. To attract customers to the system, Navistar is offering breakdown protection that includes a free replacement vehicle and guaranteed parts availability.
By late summer, Navistar hopes to select a single engine maker as its preferred supplier for engines with more than 300 hp. DeFosset said the company is currently in discussions with its three sources: Detroit Diesel Corp., Caterpillar Inc. and Cummins Engine Co. Inc. Navistar builds its own diesel engines in the 160-hp to 300-hp range.
Navistar already has forged preferred supplier deals with Dana Corp. for medium-duty driveline components and with Rockwell Automotive for heavy-duty axles, DeFosset said. In March, Navistar named National Seating Co. as its new standard-suspension seat supplier.
For suppliers, getting closer to Navistar should mean greater volumes and participation in joint marketing programs. Warranties from Navistar and its suppliers could be combined to provide more comprehensive coverage.
However, DeFosset said the truckmaker would also expect suppliers to become more accountable for warranty costs, especially under guaranteed reliability programs. Truck operators can't afford vehicle downtime in an increasingly competitive industry.
DeFosset, interviewed this month at the International Trucking Show in Las Vegas, also said Navistar in April revised its original industrywide projection for 1997 heavy-truck sales upward by 10,000 units, to 180,000. The company also may bump up that forecast again this year, but DeFosset declined to elaborate.
Last year, the heavy-truck industry sold 170,000 vehicles, according to the Automotive News Data Center.
Through April, Navistar sold 28,905 medium- and heavy-duty trucks, off 1 percent from the 1996 pace. Class 8 sales of 10,386 are up 5.8 percent so far this year.
Through the first four months of this year, Navistar's market share in the Class 8 category was 19 percent, putting it a distant second to Freightliner Corp.'s 28.5 percent. Navistar's Class 8 market share climbed to 21.6 percent in April.
Last year, Navistar's Class 8 market share declined to 16.7 percent, from 18.4 percent in 1995. But the company is committed to regaining a 20 percent market share in the segment 'in the next two to three years,' DeFosset said.
To get there, Navistar is boosting production rates and putting new models in the pipeline. In April, the company increased heavy-truck production at its Chatham, Ontario, plant from 62 units per day to 100. It is also holding production of heavy trucks at its Springfield, Ohio, plant constant at 65 units per day.
Navistar is developing new Class 8 trucks for introduction late next year and in 2002.