Chrysler: Better Supplier Relations Spur Better Products

CHRYSLER PURCHASING CHIEF DAN Knott says the days of entitlement attitudes at the auto maker are over as it remakes itself after bankruptcy, pledging cultural change aimed at sharing future prosperity with suppliers.

“We all got a wakeup call,” Knott says, referring to the auto maker's troubled supplier relations, which led to a string of underwhelming products and, ultimately, bankruptcy.

“We were reminded, yet again, that a large portion of our content comes from the supply base, and you better darn well have a pretty good relationship with them, because if you don't, I'm not sure you can have the best cars and trucks.”

According to a recent study by Michigan-based Planning Perspectives, Chrysler has shown improvement in its supplier relations since bankruptcy but last year still ranked last among North America's Big Six auto makers.

Chrysler's performance was classified in the “very poor” to “poor” range.

Knott's remarks reiterate those of CEO Sergio Marchionne, who recently said Chrysler has an unspoken “social contract” to ensure the profitability of its suppliers.

To illustrate the change in attitudes at Chrysler, Knott cites new ways to deal with controversial topics such as supplier innovations.

Too often in the past at Chrysler, suppliers would submit an innovation that would get lost in a black hole.

If they did hear back from the auto maker, it often was too late in the development cycle.

But Chrysler now will help pay for innovation independent of a particular product program.

“We'll pay the money upfront. When it's done, we'll put it on a program,” Knott says, citing as one example Chrysler's well-received new telematics platform and entertainment system.

Perhaps more importantly, suppliers are hearing back from Chrysler with a decision on prospective contracts faster than ever.

On two recent occasions, the auto maker gave a supplier a decision within six weeks. In the past, it would have taken as long as 180 days.

Knott admits Chrysler does ask for a clear delineation over use of intellectual property.

“I want the right to use it if something should happen to you (the supplier) going forward,” he says, recalling instances when Chrysler built a product around an innovation only to discover it could not use it when the supplier went belly-up.

“Supplier develops the IP; they own it. We develop the IP; we own it. If we develop it together, we share it,” he says.

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