TRAVERSE CITY, MI – Suppliers have been beefing up their engineering capabilities for years at the same time auto makers have been outsourcing more product-development duties in an attempt to cut costs.

So imagine the response from parts producers to Chrysler Group’s Tom LaSorda, who said at the Management Briefing Seminars here this week that in some cases suppliers are not keeping up with the auto maker from a technology standpoint. (See related story: LaSorda to Suppliers: ‘Out-Innovate Us’)

The company’s chief operating officer says Chrysler’s Material Cost Management process is “inspiring our team to out-innovate some of our suppliers.”

Some conference attendees grumbled that Chrysler cannot expect suppliers to provide the world’s most-advanced technology while at the same time demanding significant price reductions on current and future programs.

Ward’s polled four supplier CEOs, who say LaSorda’s comments reflect the OEMs’ push for continuous improvement.

Dana CEO Mike Burns: “We owe them innovation.”

Dana Corp. Chairman and CEO Mike Burns says he is not surprised by LaSorda’s message. “I think we all have a responsibility in the component industry to put new things and innovation in front of the auto makers,” says Burns, who is completing his first 100 days at the helm of the Toledo, OH, supplier.

“I think what they’re (Chrysler) trying to do is interesting. We’ll see how it plays out,” he says. “We owe them innovation.” The creative and ambitious suppliers, he believes, should not be worried. “Nine times out of 10, you get rewarded with new business,” Burns says.

He says suppliers should not “expect to be coddled by any of the big manufacturers. “We’re all big boys,” he says. “We’re in a tough market, and we’ve got to help our customers and that means driving cost reduction.”

Delphi Corp. President, Chairman and CEO J.T. Battenberg III, who sat next to LaSorda during the panel discussion following the speech, says it is difficult to generalize on whether or not suppliers are keeping pace with an OEM’s technology targets.

“You’ve seen the MIT (Massachusetts Institute of Technology) rankings on technology and patents – we’re ranked No.1,” Battenberg says of Delphi. “We have a new product coming out every day and 10 new patents every day. We are keeping up.”

Battenberg says he spoke with LaSorda briefly, and that “he’s very pleased with the technology we’re providing.” Much of that technology, Battenberg says, comes from Delphi’s $2 billion a year investment in research and development.

“There are down cycles in the auto industry. I’ve been through eight of them,” he says. “You can’t be cutting your R&D and technology during the down cycles, because we know there will be an up cycle, which we’re getting ready to go into.”

Denso America's Matt Matsushita says Chrysler’s financial problems have inhibited Denso’s ability to deliver innovation.

Mitsuo (Matt) Matsushita, president and CEO of Denso International America, welcomes LaSorda’s remarks as a positive step forward after several difficult years of working with Chrysler.

“Chrysler has been in a difficult financial situation, and that’s the reason they are so aggressive in price pressures toward suppliers,” Matsushita says. “And we (Denso) were suffering from such pressure, not based on value creation, not based on engineering improvements.”

He says the relationship with Chrysler used to be more constructive. He refers to a speech given in the 1980s at the Management Briefing Seminars by Tom Stallkamp, when he was head of purchasing for then-Chrysler Corp.

Stallkamp singled out Denso for an innovative HVAC (heating, ventilation and air-conditioning) system. “We appreciated his remark very much,” Matsushita says.

Since Chrysler’s financial crisis began in 2000, Matsushita says Denso “could not work together” with the auto maker on technological breakthroughs – the kind LaSorda now says he wants.

If the demand represents a new supplier philosophy at Chrysler, then Matsushita is encouraged. “I think he (LaSorda) is ready to be challenged by the suppliers, and I would like to welcome that,” he says. “I think Chrysler is really serious to make a new turnaround for a real working relationship with the suppliers.”

Paul Wilbur, president and CEO of ASC Inc., says he believes his company is meeting LaSorda’s demand for innovation. Wilbur says he saw LaSorda as he was leaving the conference room Wednesday afternoon.

“On his way out, Tom shook my hand and said, ‘You guys keep doing what you’re doing because you’re doing great,’” Wilbur says.

“ASC is a very innovative company,” he says. “We’ve brought, in the past three months, four whole new product innovation ideas to DC, none of which I can talk about. I think we’re innovating very hard. It’s part of our culture.”