Haden Stumbles

Chrysler Group is bankrolling the troubled Toledo operations of Haden International Group, a key supplier to the auto maker's next-generation '07 Jeep Wrangler scheduled for production this summer, sources tell Ward's.

Haden, based in Auburn Hills, MI, was unable to meet payroll in early February and reportedly closed its doors and walked away from several contracts.

But the company is back in business and living up to its agreement to source painted Wrangler bodies for Chrysler's Toledo Assembly plant, says Tom LaSorda, the auto maker's president and CEO.

“They stumbled there last week, and everyone was back to work on Monday,” LaSorda tells journalists after delivering a speech at the recent Chicago auto show. “We're back to normal.”

LaSorda declines to say how the situation was resolved, but sources tell Ward's Chrysler rode to the rescue, cash in hand.

Haden's hardship reflects a grim observation made recently by Peter Rosenfeld, Chrysler Group executive vice president-procurement and supply.

To safeguard its operations, Chrysler constantly monitors the financial well being of its supply base, and the number of struggling suppliers is up sharply since 2004.

“The weaknesses are on the increase,” Rosenfeld says during the North American International Auto Show in January.

Meanwhile, LaSorda denies Chrysler is seeking a new partner.

“We're not looking to replace Haden,” he says. “They've had some financial issues, but everyone is back to work. We're working with them right now, so I don't see that there will be a change.”

Haden was not Chrysler's original choice as Toledo's paint supplier. Durr Industries was in talks with the auto maker initially, but those talks broke off in September 2004, just three months after the historic partnership was unveiled.

The urgency with which Chrysler responded to Haden's hardship is explained by the historic nature of their agreement. As part of a $2.1 billion investment, Haden is one of three suppliers contracted by the auto maker to oversee key functions at Toledo Assembly, sister plant to Toledo North Assembly, home of the Jeep Liberty and new Dodge Nitro.

Together with Kuka Robot Group and Hyundai Mobis, Haden is responsible for delivering painted bodies for the new 2-door Wrangler and, sources say, a later 4-door version of the vehicle.

The completed bodies are delivered by conveyor to where Chrysler employees perform final assembly.

Haden, Kuka and Hyundai Mobis each are responsible for supplying their own labor. Those workers currently are non-union, but organizing efforts by the United Auto Workers union are under way.

Chrysler estimated the arrangement would save $300 million, compared with conventional OEM assembly, where the auto maker owns and operates all operations.

Pilot production had begun when Haden allegedly ran out of cash. Chrysler's support for Haden is consistent with the auto maker's ongoing efforts to improve its relationships with suppliers. It has committed $110 million in aid to ensure bankrupt Collins & Aikman Corp. stays current with its shipments. “We do everything we can to stand by suppliers who are financially challenged,” Rosenfeld said recently.

The Wrangler program is no less important to Chrysler than its LX cars. The hiccup involving Haden has done little to discourage LaSorda about the wisdom of contracting certain assembly functions.

“This thing's working,” LaSorda says of the Toledo model. “We're painting cars now as we speak. As I always stated right from the beginning, if there ever was a problem, then it's us owning it. But right now, we don't have a problem.”

Rosenfeld told Ward's that Chrysler would evaluate the operation closely before deciding whether it might work somewhere else.

“I'd say it would be a year or so,” Rosenfeld said. “The reason I say that is we need to see how we do at launch. We need to see what the quality of the vehicles looks like. And if everything's looking good, it may make sense for more.

“I like to think of it as a noble experiment,” he adds. “We're trying a completely new model here that no one's ever attempted here in the U.S. before, if not in the world.”