Chrysler's turning up the heat on its suppliers to reduce the cost of parts by 25 percent over the next three years. That's not just new parts, either, but everything. A widget that hasn't changed in any way must drop in price by 25 percent in three years time. The automaker's also making changes to its own operations to help with the effort and save money on components. Sharing common pieces over a larger range of models will help, as will reducing expensive late engineering tweaks. Chrysler is also sharing its production schedule with suppliers to smooth out planning and reduce overtime and raw material costs for suppliers.

It should come as little surprise given the big-box provenance of Bob Nardelli, but Chrysler is pushing its suppliers to match the bargain prices from suppliers in countries like China, India and Mexico. The cost reduction stiff arm will likely lead to further investment in low-cost countries, and the automaker itself has added engineering locations in Shanghai and Chennai, as well as beefed up its Mexico engineering operation. It seems that this push to get suppliers to gut prices on parts that are already being produced, along with Chrysler's encouragement to send operations to places where labor costs are extremely low, will lead to more US-based layoffs as the OEMs shift their locations. Seeking efficiencies and cost reductions on parts in the pipeline is one thing, but with this Wal-Mart style move to browbeat suppliers into cost reductions, will there be anyone left to buy the cars that the parts go in after all the jobs leave?

[Source: Automotive News - sub req.]

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