Company CEOs are typically big supporters of capitalism and the free market, and they should be. It's a great system for raising the standard of living, rewarding hard work and encouraging efficiency.
Every once in a while, though, they get caught up in some very anti-capitalistic thoughts.
Witness the recent comments of Chrysler CEO Sergio Marchionne, who said when he sees the healthy balance sheets of automotive suppliers, it makes his “blood pressure go up.”
Marchionne wants a piece of the action.
Try to forget for a minute that Chrysler just reported that its second quarter sales were up 14 percent from the same period a year ago — to $20.5 billion — and net profit was up 22 percent for the same period, to $619 million.
That profit margin may be too slim for Marchionne's liking, but it's definitely in the black. And the trend looks pretty nice. Some automotive suppliers are doing better, but that shouldn't be a problem, when you're looking at the issue from an economics perspective.
Shouldn't OEMs want their suppliers to be profitable? That puts them in good shape to invest in new capacity and to continue to improve their efficiency.
Doesn't Chrysler have quite a bit of power in its relationship with suppliers? Of course it does. There aren't many automotive OEMs out there. Auto suppliers are addicted to the high volume of business that they get from companies like Chrysler.
We all know that the alternative to having healthy suppliers — having suppliers that are in financial trouble — is a recipe for trouble. And not too long ago, auto suppliers and OEMs were looking across the negotiating table from each other, wondering who would be the first to file for Chapter 11 … or worse.
But Marchionne isn't alone.
Plastics processors sometimes make the same sorts of comments about profit margins at their suppliers. In this case, we're talking about resin suppliers.