Chrysler Corp.'s purchasing code — which treats suppliers like an extended family — has been given an early salute by DaimlerChrysler AG.
Purchasing will be one of the first operations to be centralized. And the new company has picked Chrysler Chief Financial Officer Gary Valade to run it.
``Purchasing is an area we need to focus on,'' Valade said at a news conference last week in London. ``It will be fully integrated.''
During the transition, the purchasing departments of Chrysler and Daimler-Benz AG each will report to a joint organization led by Valade. Thomas Sidlik, Chrysler's executive vice president for procurement and supply, will remain in that role.
Valade and Sidlik also will get seats on DaimlerChrysler's board of management. And Tom Stallkamp, the creator of Chrysler's purchasing philosophy, gets a high-profile assignment as president of DaimlerChrysler.
Suppliers expect DaimlerChrysler to seek volume discounts from suppliers in return for huge global orders. If so, the big winners most likely will be suppliers that already do business with both companies.
``Those of us who have manufacturing and engineering facilities on both sides of the pond will have an advantage,'' said Frank Macher, chief executive officer of ITT Automotive in Auburn Hills, Mich.
Other suppliers may not be so lucky.
``If you are a regional North American supplier to Chrysler, I would be concerned,'' said James McElya, president of Siebe Automotive in Southfield, Mich. ``Suppliers to Chrysler will quickly run out and try to partner with a supplier to Mercedes.''
One key issue to be decided is how many Tier 1 suppliers will do business with DaimlerChrysler. Before the merger was announced, Chrysler had intended to shave 300 Tier 1 suppliers from its roster by 2000. Today there are 900.
Last week, Valade said it is too early to set a target for DaimlerChrysler.
Although details on how the new purchasing operation will work are sketchy, the recent histories of both automakers offer some clues.
Both companies have set up cooperative cost-cutting programs that let suppliers pocket some of the savings. In North America, Chrysler's SCORE program requires suppliers to propose cost-cutting ideas totaling 5 percent of annual sales. Suppliers keep as much as half of any savings over that amount. Many Big Three suppliers consider SCORE — also known as the Supplier Cost Reduction Effort — to be the industry's best system. A few years ago, Daimler-Benz launched a similar program called Tandem.
Both companies also have created experimental assembly plants that grant suppliers major responsibilities. In Brazil, Chrysler has tapped Dana Corp. of Toledo, Ohio, to produce a complete rolling chassis for the Dodge Dakota.
Meanwhile, Daimler-Benz has picked a handful of suppliers to install components for the Smart car inside its assembly plant in Hambach, France.
Aside from its experiment in Brazil, Chrysler does not appear quite as ready to give suppliers so much responsibility. Early this year, for example, Chrysler executives said they were not prepared to let a supplier design an entire vehicle interior.
Chrysler does expect its suppliers to engineer their own components. And Chrysler gives suppliers considerable input in the early stages of vehicle design.
Ron Cutler, vice president for marketing for TRW Inc. in Cleveland, predicts Chrysler will give suppliers more authority to design entire component systems in future generations of vehicles.
``We know already that Chrysler is starting to move in that direction,'' Cutler said in an interview with Automotive News, a sister publication to Plastics News. ``I don't know how long it will take, but they are moving step by step.''