The Chrysler group's announcement yesterday that three suppliers will shoulder $300 million of the cost of its new Jeep project in Toledo, Ohio, surprised and intrigued industry executives here on Tuesday.
"It's very creative," said Dave Cole, chairman of the Center for Automotive Research. "It's a step beyond what the industry is doing. It's new business-model thinking."
The suppliers - including one that has never built parts in North America - will operate the paint, body and chassis operations at the Jeep assembly complex.
The suppliers and Chrysler said they are pioneering the first joint automaker/supplier assembly plant in the United States. The suppliers will operate independently in the Chrysler plant.
The suppliers are: Durr Industries, paint operations; Kuka Group, body shop; and Hyundai Mobis, chassis operations.
The Korean-owned Hyundai Mobis is currently building its first U.S. manufacturing operations in Alabama to serve the Hyundai Motor Co. assembly project there.
The company will build a 200,000- square-foot building in Toledo to produce rolling chassis modules out of powertrain and drivetrain components, wheels and tires.
"I would have guessed Dana for the chassis," said Neil De Koker, president of the Original Equipment Suppliers Association in Troy, Mich.
Tom LaSorda, Chrysler group's COO, who will speak here today, said that "Dana did bid on some projects there, but they did not get this one."
"This is a big win for Chrysler, to be able to bring another global supplier to North America," LaSorda said, referring to Hyundai Mobis.
Each supplier is expected to employ around 200 people at the plant.
Yesterday's announcement also calls for Kuka to construct and operate a 250,000-square-foot body shop in Toledo. Kuka also was instrumental in helping the Chrysler group develop its redesigned 2004 minivans.
Durr will construct and operate a 400,000- square-foot building and paint the Kuka-built vehicle body.
In December, Chrysler announced plans to invest $2.1 billion in its Toledo complex, including $900 million for plant upgrades.
Chrysler's Jeep Wrangler assembly plant will be overhauled and a second model added. Production of a redesigned Wrangler begins in May 2006. A Wrangler derivative follows in 2007/2008.
The UAW will bargain three separate labor agreements with the suppliers. Contracts between the suppliers and Chrysler are still being negotiated. But a multi-year agreement that could run up to a decade is being considered, said David Meynell, president of Durr Industries Inc. in Plymouth, Mich.
The suppliers will be compensated on a per-vehicle basis. Per-unit compensation is based on various bands of volume, Meynell said. "We are at risk if the product doesn't sell," he said.
Delphi Corp. Vice Chairman Donald Runkle said the Chrysler project carries on the trend of sourcing complete modules, which Delphi does around the world. But he said such plans are driven by the customer - not the supplier.
"We'll entertain anything the customer wants us to consider."