Right about now, the companies that make up one of North America's newest automotive supply chains are wondering, 'What's going to happen to us?'
That's the question that came up repeatedly this month at a meeting of Mercedes-Benz U.S. Interna-tional Inc.'s 70 Tier 1 suppliers in Birmingham, Ala.
The recent merger announcement from Chrysler Corp. and Daimler-Benz AG has triggered questions from parts makers and executives alike at Daimler's sole American auto plant.
But Mercedes-Benz executives were frank with their supplier network.
'The truth is we don't know what's going on with Daimler-Chrysler,' said Robert Birch, vice president of purchasing and logistics for the Mercedes-Benz unit in Vance, Ala.
'We don't talk to the Chrysler people, nor do they talk to us. And we probably won't talk together until the deal is consummated. And that probably won't be until this fall sometime - probably October,' said Birch.
The Vance sport-utility plant launched production a year ago, relying heavily on a short list of system suppliers, rather than producers of individual parts.
Indications from the proposed Daimler-Chrysler merger are that Chrysler's procurement offices in Michigan will call the shots in North American sourcing. That will not affect Daimler's European operations much. But how it might affect the company's single U.S. auto plant is simply unknown, Birch said.
The Alabama factory's suppliers have more security than most firms that sell parts to auto assemblers. Mercedes-Benz signed eight-year contracts with the group instead of the more traditional four-year deals.
This month, suppliers asked Mercedes how it intends to handle future part deals, including either additional components or parts revisions. Will the add-ons require rewriting the contracts?
Birch told the group that any additional sourcing will simply fall under the existing eight-year contracts.
'The supplier would just have parts added to his parts list,' Birch said.
Birch told the group that the venture wants to continue localizing the content of its M-class sport-utility. Although major systems come from U.S. plants, the drivetrain is produced by Daimler in Germany.
Currently, he said, the Alabama vehicles have about 64 percent local content, including labor costs.
That is down from 65 percent at launch, he said.
Higher production has actually reduced local content.
Labor costs during the ramp-up were high as a full work force turned out low numbers of trucks.
Now that the plant is building 300 trucks a day, the value of the labor is reduced.
'We're required to have 62.5 percent local content by the year 2002,' Birch noted.
'We'd like to have considerably more than that. We don't want to even be close.'