DaimlerChryser AG's Chrysler Group will try to use a supplier rating system to reach its supplier price targets, as opposed to annual, across-the-board price reductions.
The Auburn Hills-based automaker is giving suppliers Internet access to a scorecard where they can see their rating, along with their competitors', in specific component groups, said Peter Rosenfeld, vice president of worldwide procurement and sourcing strategy for Chrysler Group. The automaker will use that data to show suppliers the price, quality, technology and delivery standards they must meet to keep business. Firms that make several parts will be rated on each part.
``Under the current circumstances, I don't see a need for that type of price-down,'' Rosenfeld said of the annual cuts automakers demand from suppliers. ``We expect suppliers to be competitive within [the system].''
Suppliers' ratings will be updated often. Chrysler already has shifted about $5 billion in business from low-rated suppliers to those rated higher, Rosenfeld said.
One supplier sales representative who did not want to be identified said Chrysler is using a new method to achieve the same result: lower prices for components.
``It is different from them coming to you and saying, `We want these cuts,' but it basically amounts to the same thing,'' the sales rep said.
Rosenfeld said suppliers will benefit from the transparency of the scorecards, knowing exactly how they differ on price, costs and quality ratings.
``I'm not going to play it close to the vest. ... We're telling you what the constraints are, and we'll help you in figuring them out, and we'll tell you where your competitors stand,'' he said.
``Then you have the choice to do business with DaimlerChrysler or walk away.''
The head of a suppliers' trade group said it is not quite that simple. A supplier simply cannot walk away from a customer that may be a third of its sales, said Neil De Koker, president of the Troy-based Original Equipment Suppliers Association.
De Koker said he has not seen Chrysler's new scorecard and has not heard a lot of feedback yet. But he said it could be a step in the right direction if the automaker's rating criteria are fair.
``Anything should be better than it has been. What's worse is if DaimlerChrysler takes 5 percent off without negotiating. ...
``Either way, you're still going to be forced as suppliers to participate in order to survive,'' he said.