Automakers, in this age of just-in-time parts delivery, have been drawing their suppliers closer to their North American vehicle assembly plants.
Nissan, Toyota, Ford and Mercedes-Benz all have vehicle assembly plants in North America where suppliers operate in adjacent buildings or so-called supplier parks. It's a model that has been tried periodically around the globe as well.
But in a decade of trying, the industry has not proved that this kind of "plant of the future" has a future. DaimlerChrysler thinks it does. Honda rejected the concept.
Volkswagen AG, Ford Motor Co. and General Motors all have plants in Brazil with varying levels of supplier investment and assembly line involvement.
DaimlerChrysler also had one in Brazil. Dana Corp. supplied a rolling chassis to DaimlerChrysler's Dodge Dakota pickup plant in Campo Largo, Brazil, for 19 months. The automaker closed the plant in early 2001. It was the victim of a faltering Brazilian economy.
Now the Chrysler group is pushing that envelope in Toledo, Ohio.
The DaimlerChrysler Toledo Supplier Park, a bold experiment and unique partnership involving the automaker and three Tier 1 suppliers, began producing the redesigned 2007 Jeep Wrangler in late July.
The Chrysler group surprised the industry in August 2004 when it told of plans to have three key suppliers invest in separate parts of a new Jeep Wrangler plant in Toledo. The suppliers were to own and operate the paint, body and chassis operations.
The automaker heralded the model as the way of the future. Since then, one of the three suppliers, Haden International Inc., unexpectedly dropped out of the deal.
The Chrysler group scrambled to find a replacement for Haden, which had planned to own and operate the plant's paint shop. The automaker tapped Magna Steyr, an Austrian supplier and vehicle assembler that it knows well.
"I think any time you have something as groundbreaking as what we're trying to do, you are going to run into some hiccups," says Byron Green, vice president of manufacturing in Chrysler's truck and activity vehicle group assembly operations. "But it did not slow us down one bit. We couldn't be more pleased with what Magna has brought to the table in terms of the understanding of paint processes, and everything is working out fine."
2 own facilities
The Toledo Supplier Park will be operated by the Chrysler group and its three supplier partners: Magna Steyr, Kuka Group and Hyundai Mobis-owned Ohio Module Manufacturing Co. Kuka and Hyundai Mobis own their portions in the Toledo Supplier Park as planned. Magna Steyr will operate the paint shop, but DaimlerChrysler owns it.
"Magna Steyr brings to us a level of production expertise that we need because you really need that for someone taking over at that stage of the game," Green says.
The key to the supplier park's success will be maintaining what has become "truly a partnership" and not the typical supplier-customer relationship, Green says.
"That's something we learned while visiting our Smart assembly plant in France," he says. The Chrysler group visited the Smart plant, in Hambach, France, shortly after revealing its bold plans.
Eight suppliers build modules in that DaimlerChrysler plant and supply directly to the production line. Inventory is almost zero. The complex has 14 buildings that are shared with suppliers. Ironically, one on-site module supplier left the auto business, forcing Smart to find a replacement.
Representatives from the Chrysler group's purchasing and engineering teams that went to France did so mostly to see how the automaker and suppliers did business together.
"It's a difficult endeavor to kind of pull off," Green says. "The take-away was the fact that it has to be a true partnership; you cannot have a dominant player. We were really trying to make it a series of equals working together to produce products."
The uniqueness of this three-way partnership is that two of the suppliers have an equity stake in the project, saving the Chrysler group $300 million for other endeavors.
The three suppliers will funnel their technical expertise into Chrysler's assembly process, "and I think we can leverage each other's strengths and produce a really high-quality vehicle that the customer will really, really enjoy," Green says.
Other carmakers have been curious about the Toledo Supplier Park and have even visited the site, Green says.
"We've done some cross sharing in terms of visits to their sites and visits to our sites," Green says. "Everybody's curious about how it will work, can you make money at it, and how you will coordinate the operations to become one seamless event."
Not everyone shares Chrysler's enthusiasm for a supplier park.
Honda of America Manufacturing Inc., for example, considered but rejected a supplier park for its new $550 million assembly plant in Greensburg, Ind.
Honda may require a handful of suppliers to locate near the Greensburg plant, where Honda will build an undisclosed model with a fuel-efficient four-cylinder engine beginning in the fall of 2008. The plant will have an annual production capacity of 200,000 vehicles.
"For the most part, the majority of our parts will come from our existing supply base in the Midwest," says Larry Jutte, general manager of Honda of America Manufacturing. "It's a little bit early to predict with exacting precision what we will do with our supply base versus do in-house. We are not considering supply parks and that whole concept."
Honda rejects concept
But Honda did examine the supplier park concept as it considered where to build its sixth automotive manufacturing plant in North America.
"We've studied this many different ways," Jutte says. "We didn't see it as a huge positive - from a financial standpoint - impact to our facilities. That equation is a pretty technical equation to talk about.
"We finally decided that wasn't the direction we were going to go, and it's not that we want to tell suppliers exactly what to do either. We want them to be strong and vibrant and profitable companies on their own."
DaimlerChrysler has invested $2.1 billion in the Toledo Supplier Park and the neighboring Toledo North Assembly Plant. Of that, the total capital investment is projected at $900 million toward manufacturing initiatives and $600 million for the Dodge Nitro SUV at Toledo North Assembly Plant.
Says Green: "I think everybody's watching us to see how this is going to be, and we're going to surprise them."
You may e-mail Ralph Kisiel at [email protected]