Chrysler-Daimler merger may benefit service providers
By Staff -- Industrial Distribution, 7/1/1998
Newton, mass.--The proposed $38 billion merger of Chrysler Corp. and Daimler-Benz AG should benefit distributors that already provide commodity management and other services for vendor-slashing automakers.A merger of the two companies, to be named DaimlerChrysler, is expected to trigger further consolidation of the global auto industry. Analysts and some distributors expect the new company to trim procurement costs by further reducing its suppliers and, to some extent, wielding its purchasing clout.
"This may mean opportunities for distributors to offer additional services and to really look at activity-based costing to sell services other than just products," says Herbert Haggard, CEO of Haggard & Stocking Associates, Inc. in Indianapolis, Ind., a Chrysler supplier. "I don't see how it can possibly decrease the sales for distribution but it may adjust where the sales are in the marketplace."
"We see it as an opportunity," agrees John Bachmann, corporate sales and marketing manager at Wainbee Limited in Mississauga, Ontario. The Canadian distributor has managed fluid power components for General Motors production plants for more than two years and is adding employees as interest in those services builds. Bachmann says distributors that have implemented technology such as bar coding, sophisticated EDI and warehouse management systems will have a leg up.
"It certainly puts the squeeze on small distributors," he says. "If you have that (technology), we see the trend -- and the Chrysler-Daimler merger as part of this -- as being more of an opportunity than a threat."
Chrysler, meanwhile, continues to profit from production-savings ideas generated by distributors in its Supplier Cost Reduction Effort. The initiative saved Chrysler $1.2 billion last year and the company expects it will save nearly $2 billion by the end of its model year in July. Distributors who find cost savings receive guaranteed margins. Chrysler spokesman David Barnas says primary, or tier-one suppliers, have clearly caught on to the nine-year-old initiative and Chrysler will target second- and third-tier suppliers.
"Eliminating waste from those is the next big challenge," Barnas says. "We're looking for them (first-tier) to set up SCORE programs with their suppliers...and we're even working more closely with our suppliers to eliminate waste in the system. The whole vehicle manufacturing process has waste in there that can be taken out."
Barnas would not comment on merger questions because the deal is pending before government regulators.
Textron Inc., the Providence, R.I. based conglomerate and fastener manufacturer, is another company that believes it will benefit from the merger. Spokesman Steve Capoccia says the company is well positioned because of its global presence.
"The OEMs are looking for that -- to be where they are located and getting [product] there on time," he says. Mercedes is Textron's number one fastener customer in Europe, while Chrysler is the largest U.S. customer for Textron's interior-exterior components business.
Haggard does not anticipate DaimlerChrysler pushing for steep price reductions. He says since the market has already pushed many prices down, "they're going to have to look at their total procurement costs. If they look at the total cost of doing business, there are efficiencies to be gained."
To help accomplish that, he believes Chrysler will continue to consolidate vendors and services.
Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
