Chrysler and Fiat rev up for savings

16 November 2009

16 November 2009 | Jake Kanter

The alliance between Chrysler and Fiat is aiming for procurement savings of $2.98 billion (£1.79 billion) by 2014, according to its five-year plan.

Chrysler's strategy, based on its new links with Fiat, was unveiled by head of purchasing Daniel Knott, who said the plan aims to "strongly contribute" to the US carmaker's bottom line.

It is the first indication of the impact on buying since the two companies made an [Automotive] agreement this summer. Chrysler emerged from bankruptcy protection after signing an alliance with Fiat earlier this year (Web news, 12 June).

Speaking in the US this month, Knott said savings would be achieved as a result of aligning the companies' procurement teams and introducing weekly savings meetings. Other plans include developing joint purchasing strategies for major commodities and suppliers, as well as increasing low-cost country sourcing and improving assessment of vendor capability.

Chrysler and Fiat aim to share two-thirds of their supply base by 2014 and will use their combined $68 billion (£40.9 billion) purchasing power to buy car parts together, including steering systems and seats.

Knott also proposes to boost vendor communication and simplify procedures. Chrysler will split savings evenly with suppliers that submit successful ideas on cutting the costs of car parts - similar to a proposal unveiled by General Motors earlier this year (Web news, September 2).

"We are ranked last in the industry [on vendor relations]. My objective is to significantly improve those relationships in the coming months," Knott said.

SMnov2009

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