Suppliers doing business with the Chrysler group fear that plant shutdowns, program deferrals and increased demands to give up more profits will accompany the arrival of new CEO Dieter Zetsche.
Zetsche's efforts to stop the financial bleeding at DaimlerChrysler AG's North American operations may hit particularly hard at Lear Corp., Textron Automotive Co. Inc., ArvinMeritor Inc., Tower Automotive Inc. and other companies or divisions where sales to Chrysler account for about 15 percent or more of total sales.
The stakes are high. Supplier margins are thin. Pricing pressure from automakers is unrelenting, investors are shunning the industry, and Wall Street is worried about the health of the supply base.
Of immediate supplier concern is Chrysler's urgent need for profitability, 'and its suppliers are an obvious target,' says industry analyst Craig Fitzgerald, a partner with Plante & Moran LLP of Southfield, Mich.
Because of the long partnering relationship between Chrysler and its suppliers, those suppliers have given up less profit than suppliers to General Motors and Ford Motor Co. have, Fitzgerald says. 'But that is changing,' he adds.
Fearful of reprisals from DaimlerChrysler, most supplier executives would talk about the potential impact of the leadership change on their business only on condition of anonymity.
The automaker didn't help suppliers with its surprise move to shut seven assembly plants for a week in late October, announced the day after third-quarter earnings.
For a senior executive at a just-in-time supplier to Chrysler who got the notice the preceding Thursday afternoon, the news stung. 'If they take their plants down, we have to take our plants down; we have to give our employees more than a one-day notice.'
But a spokesman for a global interiors supplier expects little trouble. 'We've worked with the Germans for years,' he says. 'The biggest change came from the (1998) Daimler-Benz/Chrysler merger.'
COST CUTTING TO RISE
The cost cutting and restructuring begun under dismissed CEO Jim Holden is expected to increase under Zetsche.
Tighter control from the European side of DaimlerChrysler will not improve life for suppliers, says an executive with a Tier 1 parts maker. 'There will be less partnership and more `take out the cost or else,' ' he says.
Paine Webber analyst Gregory Kagay says suppliers' immediate concerns should be about sales volumes at the Chrysler unit, not about distant new programs. Says Kagay: 'The next Jeep Grand Cherokee is too far out to move the needle.'