TRAVERSE CITY, Mich. -- Saying that the Chrysler group wants more financially secure suppliers, Chryslers purchasing chief says that it will no longer competitively bid parts from high-achieving suppliers.
That represents a step away from the common Big 3 practice of pressuring suppliers to meet lower prices or face being dropped on vehicle programs.
Chrysler will place suppliers in a so-called Reward Zone if they meet specific targets on quality and technology, Peter Rosenfeld, Chrysler group executive vice president of Procurement & Supply, said Wednesday at the Management Briefing Seminars.
Once in the zone, he said, suppliers will retain the Chrysler business as long as they continue to perform at the same level. They will receive first right of refusal on future business, and they will have the opportunity to be pre-sourced on new programs if they meet a target price.
It will strengthen their bottom line, Rosenfeld said. Those folks in that Reward Zone know that they have business with us for the long run.
Rosenfeld said that only 10 to 15 percent of the companys suppliers are currently in that zone.
However, he also said that under-achieving suppliers will be placed into a Resource Zone. He said Chrysler will work with those companies, but in general, they will be at risk of losing their business.
Most of Chryslers suppliers are not in either category, he said.
Along with General Motors and Ford Motor Co., Chrysler has alienated some North American suppliers by focusing on price at the expense of long-term relationships. Chryslers supplier relations tanked five years ago when it began demanding retroactive price cuts on existing programs and threatened to drop suppliers who failed to comply.
That was a sharp departure from Chryslers more collaborative purchasing practices of the 1980s and 1990s, which were credited with helping the automaker make product innovations and reduce operating costs.
The new approach represents an evolution that has been under way for a few years, Rosenfeld said. Its not a sea change for us.
You may e-mail Lindsay Chappell at