DETROIT -- Chrysler Group is serious about spending more with minority-owned suppliers and has penalized four Tier 1s that aren't following its lead.
The four lost the ability, at least temporarily, to bid on future contracts. Chrysler wouldn't name them or say if they have improved enough to resume bidding.
Chrysler's Tier 1 suppliers in the Supplier Diversity High Focus program boosted their purchases from Tier 2 minority- or women-owned suppliers from $170 million in 2010 to more than $700 million last year, Chrysler said.
Also, more than 17 percent of the $26 billion of Chrysler's total purchases in North America last year were directly or indirectly from minority or women-owned businesses.
"We think at this point that it has been extremely successful," said Kevin Bell, Chrysler's senior manager for diversity supplier development, speaking of the minority-supplier program.
Chrysler scores all suppliers annually on their "minority sourcing performance," gauging how much business they do with companies owned by women and members of minority groups.
The minority sourcing score normally represents 5 percent of the Tier 1's overall score with Chrysler, which helps determine whether a purchase contract is signed. But if the Tier 1 has less than 1 percent of its purchases from minority- or women-owned suppliers, the importance of its minority sourcing score grows fourfold. The added weight can hamper significantly a supplier's ability to win bids.
Bell said about 65 percent of 134 of Chrysler's Tier 1 suppliers that entered the Supplier Diversity High Focus program in 2010 have "graduated" by increasing their purchasing from minority-owned businesses to goals that vary based on their business segments. Chrysler continues to work with 59 suppliers that have either recently entered the program, remain there or have not made progress, he said.
In the last year, Chrysler temporarily excluded four Tier 1 suppliers from bidding on future programs because they had failed to raise their percentage of purchases from minority-owned suppliers, Bell said. He said the lost bidding potential caught the attention of top managers at those suppliers.
Bell said, "You can see that some companies were dragging their feet."