Fool me once…

Fool me once, shame on you; fool me twice, shame on me. Yet like most people, I keep getting fooled by a corporate news media that doesn’t spend the time to get stories right. I should really have known better because I’ve been watching news outlets screw up Chrysler reporting since the days of the “unsafe minivan door latch.” That’s the latch that held up more often (as a proportion of accidents) than the “safer” ones competitors had.

Chrysler’s Chief Procurement Officer, John Campi, talked about his plans to reduce parts costs by 25% over three years; it was reported by some reputable outlets as Campi pushing around suppliers for 25% price cuts or see their business go to China and other low-labor-cost countries. While Campi certainly could be expected to do this, Chrysler PR people noted that his stated plan was “on taking cost out of the entire supply chain, which includes costs Chrysler has within its operations and are part of the supply chain. To that end, the collaborative cost-savings initiative…calls for Chrysler to stabilize its production schedule; reduce engineering change notices and reduce component proliferation.”

This would cut costs for both Chrysler and the parts suppliers, according to Campi, increasing their profits while raising Chrysler’s. He said: “Not once in any public or private discussion have I ever suggested that suppliers would have to reduce pricing to meet the 25% cost out challenge without our mutual objective of protecting their profitability in dollars and percent. Our drive for cost reduction will only be accomplished with collaboration between Chrysler and our supply base. That simply cannot happen if it is not mutually beneficial.”

It’s hard to say how sincere he is, given his (and Bob Nardelli’s) background, but I will say that Chrysler’s done it before. The famous SCORE effort (search for it on Allpar) saved Chrysler billions and also put billions into the hands of its suppliers. 

If they can get those cost reductions without pushing suppliers into Mexico, China, India, or wherever the cheap-labor hot-spot of the year is - will some South American country be next? - I’m all for it.