Monday, December 15, 2008

Chrysler's supplier issues expand

Top procurement exec to retire for health reasons


The health of Chrysler's network of parts suppliers is "increasingly at risk" with the number of companies on its watch list for potential problems increasing by 25% within the past three weeks, the company said Friday.

The revelation came as Chrysler's top procurement executive, who oversees purchases from suppliers, announced his retirement from the company. John Campi, who had a long working relationship with Chrysler CEO Bob Nardelli, joined the automaker in January 2008 as executive vice president of procurement.

Campi "has elected to leave Chrysler for health-related reasons," Chrysler said in a statement.

On Friday, Chrysler also met with some of its suppliers and gave them "a clear understanding of the viability and accountability plan that the company submitted to Congress in support of a bridge loan," according to Chrysler spokeswoman Shawn Morgan.

She said the primary audience was suppliers who are seeking to alter the terms of their purchase orders to require payment upon delivery. That payment method deprives Chrysler of the flexibility of paying later, but ensures cash flow for suppliers.

However, Chrysler has said it is running out of the cash needed to sustain operations. That means it may need more flexibility.

Chrysler recently requested $7 billion in federal loans and warned that without immediate help its liquidity could fall below the level necessary to sustain the company through the first three months of 2009.

Chrysler Chief Financial Officer Ron Kolka said Thursday that some parts suppliers and vendors have demanded cash on delivery but that the automaker has been able to fend them off.

UAW President Ron Gettelfinger warned Friday such a situation is problematic.

"We need to satisfy the suppliers that there is going to be a tomorrow," Gettelfinger said. "If suppliers believe they cannot operate, what are they going to do? They're not going to deliver the goods. If they don't deliver the goods, the plants go down."Chrysler said it has called on everyone to work together.

"Clearly this is an industry concern and a concern for the U.S. economy," Morgan said. "It's important that the automotive OEMs and supply network work together with a sense of calm and discipline. The situation in Washington has created tension in the supply network that threatens the delicate, interconnected relationships this industry needs."

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