By Robert Sherefkin and David Barkholz, Automotive News
Detroit, Michigan - Chrysler llc purchasing chief John Campi, fed up with the carmaker's failed sourcing effort in low-cost countries, is suing the consulting firm hired to find cheaper suppliers.
Chrysler paid at least $7.7 million to Accenture for help buying parts in low-cost countries such as China and India. Chrysler thought doing so would save $900 million. Instead, Chrysler saw virtually no savings, court documents say.
"Accenture demonstrated virtually no experience in identifying low-cost-country suppliers for the automotive business and had no knowledge of the supply base in China or South America," according to the suit, filed 25 Aug in Oakland County Circuit Court in Michigan.
Accenture spokesman Jim McAvoy said the consulting firm handled one portion of Project Magellan, the code-name of the programme. At the time, Chrysler did not allege a failure to meet obligations and paid Accenture in full for services, McAvoy said.
Accenture is one of the world's largest business consulting firms. It was spun out of the former Arthur Andersen accounting firm.
In a statement to Automotive News, Chrysler spokesman Mike Palese said Accenture's fraudulent representations went to the very basis of the consultant's agreement with Chrysler and denied Chrysler hundreds of millions of dollars in anticipated cost savings.
In 2006, Project Magellan was launched by Chrysler's then-executive vice president of procurement and supply, Peter Rosenfeld. It was designed to generate $6000 million in annual purchases from low-cost countries.
Key points of the project:
2006: Chrysler seeks parts-buying help in low-cost countries.
December 2006: Accenture pitches its global capabilities to Chrysler.
February 2007: Chrysler chooses Accenture for Project Magellan's first phase and pays $563 340.
May 2007: Chrysler, Accenture agree to $5.3 million second phase.
Summer 2007: Chrysler raises concerns about Accenture's performance.
Autumn 2007: Chrysler terminates programme, pays Accenture final $1.8 million instalment.
Several consulting firms sought the assignment. On 14 Dec 2006, Richard Spitzer, Accenture's global managing partner, delivered the winning pitch. In a presentation to Rosenfeld and Chrysler co-President Tom LaSorda, he touted Accenture's experience and in-country presence in key overseas markets, saying those attributes could help deliver $900 million in savings over three years.
Instead, Chrysler argues that it got a half-baked effort. In one case, "Accenture advised Chrysler to send out for bid - all at once - $7000 million of annual value of business (10 000 parts), in giant requests with bundled commodities to random lists of suppliers."
The exercise netted essentially no bids other than those from suppliers that Chrysler directed Accenture to use, the complaint says.
Project Magellan was killed late last year, shortly before Campi took over as Chrysler purchasing chief.
Campi alluded to the failed programme in an interview this year. "When you blanket suppliers in a country like China by e-mail, and you are not doing it face to face and demonstrating your sincerity, they say, 'I don't want to deal with them,' " he said.
Today, Chrysler still buys virtually all of its $40 000 million of parts from North American suppliers. It is pursuing a low-cost sourcing plan on its own.