Despite public comments from some suppliers about resisting Chrysler's demands for a 5 percent price cut, Chrysler officials say they are making progress on its plan to cut material costs by 15 percent, or $7.8 billion by the end of 2003.
The first part of the plan was a demand for an immediate 5 percent price cut from suppliers, with the remainder of the savings - at least 10 percent of current costs - coming from improved efficiency and quality.
One well-placed official says 40 percent of Chrysler's suppliers already have agreed to the immediate 5 percent price cut, and the automaker still is negotiating with about half of its suppliers for price reductions ranging between 2.5 percent and 4 percent. About 10 percent of its suppliers have refused. Chrysler intends eventually to replace them. The yield will equal about a 4 percent price cut.
As for the second part, 1,200 Chrysler engineers are working with suppliers to improve efficiency. They are organized into about 60 commodity review groups that include members from each platform team and suppliers who try to identify best practices that can be used on all existing platforms, the official said.