Noisy axles on the Jeep Grand Cherokee cost Dana Corp. a lucrative contract to supply axles on the next-generation Dodge Ram pickup, according to a high-ranking DaimlerChrysler executive.
American Axle & Manufacturing Inc. of Detroit landed the contract to supply front and rear axles for the redesigned Ram, due in 2002 as a 2003 model.
Dana, of Toledo, Ohio, supplies axles for the current Grand Cherokee sport-utility and Ram pickup.
The switch is unusual because DaimlerChrysler cultivates long-term relationships with suppliers. A contract on a next-generation vehicle is considered the incumbent's to lose.
Asked why Dana failed to win the Ram contract, the DaimlerChrysler executive was emphatic: 'Quality.' He spoke on the condition that he not be named.
Dana, however, said quality was not the reason it lost the contract.
'We see this as a diversification issue,' said Dana spokesman Gary Corrigan. 'DaimlerChrysler and other automakers are diversifying their supplier base. They don't want just one supplier for a product. It's not an unusual thing going on in the industry.'
DaimlerChrysler spokesman Jack Ferry said Dana was not '100 percent responsible' for the Grand Cherokee problem. He declined to elaborate.
The Dodge Ram contract includes both front and rear axles for an expected 200,000 pickups annually.
Lehman Bros., a securities firm in New York City, said the entire contract will be worth up to $500 million per year. Lehman said American Axle will get business worth $200 million per year, and DaimlerChrysler's Detroit Axle plant will get the rest.
Corrigan said the contract would have been about $300 million per year to Dana. No party would reveal the length of the contract.
Customer complaints about a noisy axle surfaced soon after the start of production the new Grand Cherokee, redesigned for the 1999 model year. The noise problem has not been fixed, the DaimlerChrysler official said.
In March, DaimlerChrysler said it was investigating an unexplained, loud humming noise in some 1999 Grand Cherokees. The humming noise came from a ring gear and pinion gear in the front axle that did not mesh properly. The gears relay torque to the front axle. The ring gear and pinion gear have curved teeth, and whine when they do not mesh properly.
The automaker told customers experiencing the problem to stop at their Jeep dealer, who would align the gears.
The Grand Cherokee was redesigned at a cost of $2.65 billion, including a new powertrain and state-of-the-art four-wheel-drive system, in part to be quieter and more luxurious than the previous model.
Jeep dealers say the problem continues to be the axles, as well as wheels that bind in Grand Cherokee models with the new Quadra-Drive system. Binding can occur when the outer wheel is unable to turn faster than the inner wheel during a turn.
Quadra-Drive is the Grand Cherokee's new full-time, 4wd system for distributing power to the wheels.
`A LOT OF BUYBACKS'
'We're dusting off axle tools that we've never had to use since the '40s,' one dismayed Jeep dealer said. 'We've had a lot of buybacks. When I hear that another customer is outside complaining about the noise, I want to break into a dead run. It's a shame.'
DaimlerChrysler never told Dana that it did not land the Dodge Ram axle contract because of axle quality, Dana spokesman Corrigan said.
He noted that Grand Cherokee sales are up more than 33 percent this year, and Dodge Ram sales are up more than 4 percent. Corrigan said that the problem with the axle gears had been resolved.
He said Dana would get the lost sales 'back in another spot. It's a very competitive market.'
The contract is a coup for American Axle. It is the company's first contract with DaimlerChrysler for a vehicle made for the North American market. In August, American Axle was awarded the new generation of rear axles for the six-ton 2001 Mercedes-Benz transporter van that is sold in Europe.
Richard E. Dauch, American Axle CEO, said that both DaimlerChrysler contracts will diversify his customer base. The bulk of American Axle's business is with General Motors.
The contract also raised eyebrows in Detroit because Dauch, former executive vice president of worldwide manufacturing at Chrysler Corp., had various personality clashes with some of his former colleagues.
The DaimlerChrysler contract reduces American Axle's percentage of sales to General Motors from 85 percent to 79 percent, Dauch said.