Chrysler says suppliers in better shape

ERJ staff report (R&PN)

By David Sedgwick, Automotive News

Traverse City, Michigan -- One year after Chrysler Group emerged from bankruptcy, its suppliers are staging a dramatic comeback of their own.

In June 2009, Chrysler purchased nearly 28 percent of its parts from companies the auto maker rated as “risk” or “high-risk” suppliers. In June 2010 that percentage fell to just 3 percent, according to data released by Chrysler at the CAR Management Briefing Seminars in Traverse City.

And Chrysler's data indicate the average supplier's liquidity has improved by 20 percent since 2009.

“Based on the data we received, the worst is certainly behind us,” said Sigmund Huber, Chrysler's senior director of purchasing. “Suppliers have been able to deal with their fixed costs, so they are profitable” at lower industry sales rates.

Still, a number of suppliers will have to refinance debt over the next 12 to 24 months, Huber cautioned. It is not yet clear how much confidence lenders have in the auto industry, or in individual suppliers.

“There will be a lot of refinancing” of expiring loans, Huber said. “We'll have to see the fallout from that.”

Chrysler's suppliers are rebounding at a time when the auto maker is trying to patch up relations with them. Chrysler plans to issue a new standard contract for vendors this month, Huber said.

The company also has taken a number of steps this year to speed up payments to vendors, improve communications and reward suppliers who slash warranty costs.

From Rubber & Plastics News (A Crain publication)