Chrysler Boss Warns Auotmotive Suppliers to Adapt or Die

During a speech given at the Auto Tech 2004 conference Chrysler CEO, Dieter Zetsche told 1000 executives that “it’s adapt or die” for automotive suppliers. Mr Zetche’s comments followed similar comments from Ford and General Motors (GM) executives. “Time and sub-par results are luxuries the North American-based auto industry simply can’t afford.” Mr Zetsche told the conference adding: “It’s a matter of survival.”

Some observers are viewing Mr Zetche’s comments as a response to criticism directed at the so-called “Big-Three” automotive suppliers. Now those critics are accusing the manufacturers of building adversarial and non-trusting relationships with the rest of the industry.

In their defence, executives from Ford and GM explained that enormous cost pressures and the highly competitive market means that suppliers simply have to rise to the challenge. In an effort to counter accusations that the companies had become “adversarial” Mr Zetsche said: “To say it’s in our mutual interest to find ways to better work together is a gross understatement. Collectively, we set the bar for quality and innovation too low,” he said. “That approach will no longer work and will only cause U.S. automakers to lose more ground to foreign rivals.”

GM’s vice president of purchasing, Bo Andersson, suggested that suppliers would have to share some of the burden. “Some of the issues we’re struggling with as automakers, you need to be struggling with because you’re going to be part of this.” Tony Brown, vice president of global purchasing at Ford, presented similarly stark message to suppliers.

In response to the advice, Original Equipment Suppliers association vice president of business development said: “Without a doubt the competitive pressures on the auto industry are forcing everyone to step up to the level of innovation and to be more sophisticated in their business processes, but there needs to be a reciprocal commitment from the buyer to make it a worthy business case for both parties, “ hinting that the Big-Three would need to be more reasonable in their requests.

The fact that the US automotive suppliers have responded to criticism by going on the offensive is a strategy that is just as likely to backfire, as it is to succeed. Detroit manufacturers have been criticised in the past for making last minute changes to design specifications – something that could force US suppliers to pursue more business with Japanese manufacturers who are known for strong supplier relations that emphasise trust and communication.