Chrysler to make China sourcing a win-win

Scott Stryker
VP, Global Supplier Quality China/Taiwan Procurement
Chrysler  

Bill Cook
General Manager, Supply Emerging Market Operations
Chrysler

Scot Sharland
CEO
AIAG

Yilong Chen, Ph. D.
General Director of Asia Pacific Affairs & Chief Representative in China



Gasgoo.com: what do you think of the impact of the appreciating RMB on China's competitiveness in your global sourcing activities?

Scott Stryker: It's a challenge like anywhere else. It's not just China, Europe has the same problem, so does Korea, so does a lot of different locations in global business. You need to pay attention to that, but you will still be competitive.

Scot Sharland: It's a huge risk, but it can be mitigated by different tools in use..

Bill Cook: The life of a program for a vehicle, from a couple years before the vehicles launched, to five or seven years after, you got seven or so year time spand. No matter the currency gets stronger or weeker, you got have a system to manage it as a supplier.

Scott Stryker: As you sell a vehicle to a customer, he's not going to care about material cost, except when prices increases due to currency fluctuation and etc. What OEMs and suppliers can do is to find ways to manage it as best as possible and as a team, because if one is in trouble, the other is also in trouble.
 
Scot Sharland: The alignment between purhasing, quality, engineering, and logistics in the field here in Asia, it's to do just that, it's to look at value analysis, and value engineering, not just design and development part, but the packging, the delivery, everything else you can think of, how do we look it totally from all to part in drive, extract as much cost out, to give us the net value that we need. That's the protection that you get to deal with these kinds of…it's when they arrive and they will arrive, and how you prepare to manage the way through that. And surviving, successful, profitable suppliers will have the systems and processes in place to do that.

Gasgoo.com: Most Chinese local suppliers are not good at logistics. How do you think of their ability in logistics?

Bill Cook: The Chinese domestic market is growing dramatically, and the suppliers are just not needed or wanted to do that, and we grow here to convince them to be part of our logistics process in sourcing. But there are companies that started several years ago provide aftermarket parts in a very sophisticated logistics process. We are trying to reach out more suppliers.

Gasgoo.com: How will AIAG help in the process? 

Bill Cook: MMOG documents that are translated, logistics evaluation, EDI training and etc. to facilitate the logistics process. 

Gasgoo.com: Should the suppliers pay for that? You don't want the suppliers to go to the third party?

Scot Sharland: As you go down for the supply chain, the reality is that there is going to third party involvement, to supplements the efforts made by Chrysler, the Tier-1 suppliers and etc., because of the speed that is required.

Scott Stryker: Chrysler is a car company, not a software company, not the experts on the tools. What we look for is the most automotive solutions, how suppliers can interface with us. I think I've never heard of any complaints on the tools, they are pretty minimal. Once the suppliers start to use that tool, it's completely worth that, because it makes them more efficient, more productive. 

Scot Sharland: This modest investment not only enables you to do business with Chrysler LLC on a global basis, but Ford, GM, European OEMs and Tier-1 suppliers. That's the value we thought to bring to harmonize the process and practise, so that if you get trained of the MMOG, LE, they can be used in other OEMs and Tier-1 suppliers.

Gasgoo.com: AIAG China has done a lot of marketing campaign to be known by more Chinese suppliers. Our question is: to what extent can Chinese suppliers help AIAG member company reduce cost?

Scot Sharland: I can't answer that, because I'm not get involved in sourcing. What I can tell you is that AIAG is here to support our member companies who are making huge investment here. The reason is very simple, the market last year is 7.2 million, the market is going to become 14, 15, 16 million? There are more opportunities than you have ever been.

Gasgoo.com: Since there are thousands of suppliers, how do you do to pursuade them to follow AIAG standards? It's not easy job.

Scot Sharland: Right, but we give them choice: the easy road or the hard road? The easy road is all the large suppliers you are competing with have used the AIAG standards. They already have the know how, they already have the proven performance to Chrysler. You can figure that for yourself.

Scott Stryker: Actually it's not us forcing the standards to the suppliers, it's the suppliers coming to us begging one tool. Why do I have to do business 15 different ways depending who I'm doing business with? Why can't I do it in one way? So that is our solution to the supply base. If you use those tools, those tools apply to all the companies.
 
Scot Sharland: These tools are co-developed by suppliers, Chrysler and other OEMs.

Gasgoo.com: But it's in North America
 
Scot Sharland: It's also used in Europe and Japan.

Scott Stryker: For us that also means for the joint venture with BBDC, Southeast Motors

Gasgoo.com: But if the Chinese suppliers become more stronger, more international, more competitive, most OEMs especially the North American OEMs are going to source more from China. That may become the reason of Sino-American trade friction.

Scott Stryker: I think it's another factor in the volatility of doing business globally.

Bill Cook: We cannot talk about trade friction at this level, but the growing market helps us bring vehicles in as an import too.

Scot Sharland: We are not politicians.

Scott Stryker: We just set to deal with that and over come.

Scot Sharland: The overall financial considerations would dictate how we do that. If you look at the models in the U.S., for example the successful Japanese and Korean companies have some vehicles in North America. Why? Because it's more cost effective than try to import them.

If you are going to pay here in RMB and sell in dollars, unless you can convince the guys in the U.S. to pay in RMB which is impossible, but you can get RMB in the U.S. right now. You have an issue. So what is here leaving you with? It leave you with the option of localization, that is assembly, not everything, maybe import a number of components, but you will add the value of assembly there. If you go to the Brazil, it's the same issue. There are always government people who are trying to run the public offices to get elected, who are talking about protection, those kinds of things, and trying to put policies in the place. But we business companies have to look at that practically.

All rights reserved. Please notify the source for any use.