Chrysler purchasing chief: Recession would hurt suppliers

DETROIT -- If a recession hits the auto industry, as some forecasters predict, suppliers could be in for another bloodbath, says Simon Boag, executive vice president of procurement and supply for Chrysler LLC.

"If the market is down as much as some people are saying, it's going to be an ugly year" in 2008, Boag said today, speaking to journalists at the introduction of a Chrysler minority supplier hiring initiative. "If there's a 10 percent reduction in the market, you'd start to see a lot more troubled suppliers."

Should auto sales stabilize, though, prospects for suppliers could improve because consolidation already has thinned the field, he said.

Boag was named to his position in June while Chrysler was planning its split from German parent DaimlerChrysler. He said Chrysler is still building its own independent purchasing organization.

But the American company will work to keep as many purchasing synergies as it can with the German company, he said. Those synergies likely will be found in raw materials such as precious metals.

Take advantage of diesels

After the split, the soon-to-be-renamed Daimler AG is retaining 19.9 percent of Chrysler. Chrysler will take advantage of the technical capabilities of its former partner, including Bluetec diesel engines.

Boag's counterpart on keeping as much common purchasing as possible at DaimlerChrysler is Heinrich Reidelbach, vice president of international procurement services.

Boag said Chrysler needs to do better at forecasting volumes so suppliers don't get burned by tooling up for production forecasts that turn out to be illusory.

Boag thinks Chrysler Chairman Bob Nardelli will help bring discipline to its supply chain. With private equity ownership, Chrysler might no longer feel obligated to give investment analysts optimistic production forecasts and make "sure we don't tool up our suppliers for extra capacity. That's just wasteful."

Nardelli is focusing on carrying out the existing strategy and not on creating another, Boag said. "We're not going to raise quality standards. We already have the standards. We just need to hit them."

Push minority hiring

Regarding minority hiring, Boag appeared at a gathering of 200 minority suppliers to say that Chrysler will reward suppliers that make an effort to improve their minority hiring practices. As a newly independent American carmaker, Chrysler will continue to promote business between minority-owned suppliers and Chrysler's Tier 1 suppliers.

Boag said suppliers who meet or exceed guidelines for minority hiring will win business over comparable competitors who fall below standards. Standards might vary by state or industry.

Jethro Joseph, senior manager of Chrysler diversity supplier development, said about $4 billion, or 13.5 percent of all Chrysler purchases, went to minority suppliers in 2006.