By Bradford Wernle and Robert Sherefkin, Automotive News
Detroit, Michigan -- Chrysler Group is speeding up payments for some engineering, design and development work and taking other actions to improve its badly frayed relations with suppliers.
The new policies -- to be fully rolled out by the end of January -- will apply mainly to parts Chrysler will buy for compact and mid-sized cars based on a Fiat platform. Chrysler projects volumes to reach about 700 000 by 2014.
The company also will use the approach on other new programmes.
Under new, Fiat-led management, Chrysler is taking a series of steps to reverse its reputation as the worst of the major North American automakers in dealing with suppliers.
"It's no fun to work in a business where you're fighting your supply base," Dan Knott, Chrysler head of purchasing, told Automotive News. "We need a healthy supply base."
The changes, which Chrysler has discussed with its advisory council, include:
* Paying some suppliers upfront for costly advance engineering, design and development work on certain new Chrysler programs.
Interiors will be a particular focus because they contain a high amount of brand-specific content and are costly for suppliers to develop, Knott said. Chrysler won't pay for engineering of commodity parts -- brackets, for instance -- that would benefit other carmakers.
* Resolving outstanding payment claims faster.
Knott said it took Chrysler an average of 287 days from the time a supplier submitted a claim to the time Chrysler did its analysis and agreed to pay. With a claim resolution process launched at the end of last year, "we've reduced that to 105 days," he said -- and he wants it to get faster.
Unresolved claims can be costly to suppliers and affect other programs. A supplier still waiting for payment for one Chrysler program might be reluctant to take on future work.
* Paying suppliers in chunks at predetermined milestones in the life of the program.
Suppliers must invest heavily for tooling at the start of a new-vehicle programme but then typically are paid as little as pennies per part delivered for the life of the programme. It can take years to recover that initial investment. And if the volumes fall short of projections, the supplier can end up taking a loss on the programme.
Knott's plan is to pay suppliers at certain milestones a percentage of what they are owed, a sharp departure from the piece-payments approach of the past.
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