Chrysler Takes $1 Billion out of Manufacturing

Improved throughput that has helped cut overtime, plus increased on-line purchasing and reductions in inventory are leading the Chrysler Group to $1 billion in manufacturing cost savings this year, says Tom LaSorda, DaimlerChrysler AG senior vice president-Powertrain Manufacturing.

Mr. LaSorda also says at last month's Traverse City automotive conference that Chrysler's recent demands that suppliers lower prices 5% this year do not pose a threat to quality.

In addition, he says Chrysler is on its way to cut new production time from about 24 months to 18 months.

Chrysler had set a cost-cutting target of $500 million for manufacturing operations in 2001, but “we're on track to double that,” Mr. LaSorda says.

Powertrain operations cut $125 million in inventory this year and reduced overtime by 30%, Mr. LaSorda says. The lower overtime isn't a result of the slower automotive market, he adds.

Chrysler also is seeing “big savings” from using Covisint, the industry's online parts exchange, for component and materials purchasing, Mr. LaSorda says. He says the Chrysler Group already has made purchases totaling $2 billion to $2.5 billion, with some contracts taking hold as early as next year.

Synergies with Mercedes and other partners such as Mitsubishi Motors Corp. also are leading to savings, Mr. LaSorda says. One key is the Mercedes automatic transmissions that Chrysler will use on its next-generation large cars.

And although the initial capacity being installed at the Kokomo, IN, facility is earmarked solely for Chrysler vehicles, Mr. LaSorda doesn't rule out supplying the automatics for Mercedes vehicles, as well.

As previously announced, Chrysler will rely heavily on Mitsubishi for development of its next C-segment car (Neon). But Mr. LaSorda says the two companies are now exploring other arenas, including sharing powertrains, with meetings scheduled recently to sort out a strategy.