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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: T Bowl who wrote (9023)	2/5/2001 8:22:39 PM
From: LK2	Read Replies (1) \| Respond to of 9256

Sounds like Chrysler has the same business model as the box makers. Squeeze your suppliers until they scream. For Personal Use Only >>>>> Monday February 5, 2001 5:10 pm Eastern Time Chrysler Suppliers Resist Price Cut By DAVID GOODMAN Associated Press Writer DETROIT (AP) -- Chrysler has run into fierce resistance after imposing a 5 percent price cut on suppliers Jan. 1, with some halting shipments to the money-losing automaker until it gave in. Even so, the DaimlerChrysler AG [NYSE:DAJ - news] division said Monday it is firmly committed to making the cut stick as part of a 15 percent, $6 billion reduction in component costs over the next three years. Many of Chrysler's more than 900 direct suppliers now are negotiating with the company over the cut, said Chrysler spokesman Jack Ferry. ``Some suppliers have advised us that a 5 percent reduction poses problems,'' Ferry said Monday from Chrysler's Auburn Hills headquarters. ``We're listening to our suppliers on a case-by-case basis. But we have to be firm on the 5 percent.'' Suppliers' responses varied from resigned acceptance to outright refusal, said Neil DeKoker, president of the Original Equipment Suppliers Association. ``There were some suppliers that stopped delivery and got (the increases) reversed,'' DeKoker said. ``Others are negotiating.'' Neither DeKoker nor Ferry would give the names of specific suppliers that refused to deliver to Chrysler until it rescinded the price cut. Chrysler lost $512 million in the third quarter. Fourth-quarter results are due out Feb. 26, and the company said losses could exceed $1 billion. In recent months, DaimlerChrysler has been taking steps to stem the losses at Chrysler, including a plan announced Jan. 29 to cut 26,000 jobs, or 20 percent of its North American work force. One of the first cost-cutting moves came seven weeks earlier, when Chrysler said it was cutting prices it paid to suppliers by 5 percent effective at the start of 2001. Chrysler buys about $40 billion a year in parts and services, which account for about 78 percent of the unit's overhead. In the Dec. 7 announcement, the automaker also said it would work with suppliers to find an additional 10 percent in savings by January 2003. The unilateral price cut marked a role reversal for Chrysler, which had been known as more supplier-friendly that larger General Motors Corp. [NYSE:GM - news] and Ford Motor Co., DeKoker said. In the past, Chrysler had worked with suppliers to meet targeted annual cuts. New York analyst Eric Goldstein said it remains unclear how much of the price cut will stick. ``Clearly, if it sticks, it's going to be a negative surprise for suppliers,'' said Goldstein, who watches auto suppliers for Bear Stearns & Co. ``A lot of suppliers are hopeful to negotiate with Chrysler and find a mutually agreeable way to save money.'' Some suppliers such as interior systems-makers Lear Corp. (NYSE:LEA - news) and Johnson Controls Inc. are primarily assemblers and are in a better position to pass on the cut to their own suppliers, he said. But suppliers that are direct manufacturers are having a harder time absorbing the cut, Goldstein said. The Chrysler price cut is only the latest step in a decade-long cost-cutting drive by automakers that is hurting the vitality of auto suppliers, he said. ``They are not earning their cost of capital or anything near,'' Goldstein said. ``If the car companies aren't careful, they're going to force their supplier base into bankruptcy.'' On the Net: DaimlerChrysler: daimlerchrysler.com Original Equipment Suppliers Association: oesa.org Johnson Controls: johnsoncontrols.com -------------------------------------------------------------------------------- More Quotes and News: Bear Stearns Companies Inc (NYSE:BSC - news) DaimlerChrysler AG (NYSE:DCX - news; NYSE:DAJ - news) Ford Motor Co (NYSE:F - news) General Motors Corp (NYSE:GMH - news; NYSE:GM - news) Johnson Controls Inc (NYSE:JCI - news) Lear Corp (NYSE:LEA - news) Related News Categories: automobiles, banking, telecom, textiles, transportation -------------------------------------------------------------------------------- Copyright 2001 The Associated Press. >>>>>