Chrysler group president and chief executive officer Dieter Zetsche on Wednesday urged auto industry suppliers to apply greater innovation and work cooperatively with the automakers to maintain US auto-making competitiveness.

Speaking at the Automotive Industry Action Group’s (AIAG) annual Auto-Tech conference, Zetsche said: “It’s adapt or die. Time and sub-par results are luxuries the North American-based auto industry can’t afford. It’s a matter of survival.”

DaimlerChrysler, Ford and GM combined purchase 80% of all US auto parts, relying on suppliers for as much as 70% of the components in some of vehicles.

“In the past, many of our suppliers provided us with components that were inferior to those they supplied to Japanese automakers. Certainly, we bear some blame. It’s our fault that we’ve accepted poor quality in the past and our designs may have had something to do with many of the poor quality components we received. Collectively, we set the bar too low. And we both lost,” Zetsche added.

Chrysler’s CEO said that’s why “tough love” and sometimes acrimony have displaced “warm and fuzzy” in industry relationships. He said the Chrysler Group had worked to increase quality, raise productivity, cut costs and streamline operations – all at the same time and for the long term.

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“For example, even though we’ve achieved about an 8% improvement in productivity two years in a row, we’re still pushing ourselves to do more. We said we would make double-digit improvements in product quality. And we got that two years running as well. It’s a bit unrealistic to expect to keep up this pace in a year with the most all-new product launches in the 80-year history of our company.

“But, we’re not letting up on our product offensive… we still expect to achieve meaningful gains in both productivity and quality in 2004.”

Zetsche said that, over the last four years, the five-year product plan reduced spending by approximately 30%, while increasing the number of new vehicles by about 50%.

“I don’t even want to think of the position we’d be in if we had not pushed ourselves this hard, this fast,” said Zetsche. “The reality is that all the hard work necessary to achieve those break-through successes is now a daily requirement for us and for each of you. We’re all fighting the same battles brought about by cut-throat competition and the need to slash costs, improve quality and innovate in every corner of our industry.”

Zetsche urged Auto-Tech members to innovate and work together.

“The only way for us to win this war is by working together to find new solutions for the problems that confront us in this industry,” he said. “What it comes down to is the need for radical approaches to some nagging problems – old and new – that simply aren’t going to be fixed through old solutions.”

One example he pointed to was announced last month in Toledo – the co-location of three suppliers in new, on-site facilities adjacent to the company’s Toledo North Jeep assembly plant.

In an arrangement similar to the rolling-chassis concept pioneered by Dana Corp. in 1998 for Chrysler’s short-lived Dodge Dakota pick-up building project in Brazil, where the supplier controlled assembly of the rolling undercarriage, integrating parts from nearby suppliers, Chrysler’s US plant suppliers will own and operate the body and paint shops plus chassis assembly operations within the Toledo facility.

This is the first time suppliers will operate as an integral part of an American vehicle assembly plant but, ironically, and despite its demonstrated expertise in Brazil, US-based Dana lost out to South Korea’s Hyundai Mobis in the bidding to supply the rolling chassis for Jeeps built at Toledo, according to a recent report.

“We think this a win-win arrangement and one that can be a prototype for many other collaborative partnerships between OEMs and suppliers,” Zetsche said.

The three suppliers at Toledo will invest about a third of the $US900 million capital investment for the new factory.

Chrysler said the Toledo complex “could see a total investment of $2.1 billion and as many as four new products over the next few years” while up to 12 additional suppliers could become involved in this single project.

“This kind of innovation is the road to the future – for OEMs and suppliers alike,” said Zetsche.

Talking about outsourcing, Zetsche said: “No free-market enterprise can survive if its costs exceed its revenues in the long term. But, while most of the talk today is about ‘outsourcing,’ DaimlerChrysler has a very deep-seated interest in ‘insourcing’ — much as we did in Toledo. “I want to stress that our company is as committed as ever to investing in America, building products in America, and keeping jobs in America. That’s not just hot air. The results of those commitments are highly visible.”

He added that Chrysler had invested some $6.6 billion in Detroit in the last 12 years in new manufacturing facilities like Mack Engine I and II and Jefferson North Assembly. “That is larger than all recent investments in Detroit’s new sports stadiums, casinos and riverfront redevelopment combined,” he claimed.

“What we really need, more than ever, is to find new ways to make major investments in America, to continue to create high-paying, high-tech jobs within our plants and to continue to compete effectively against global competitors,” concluded Zetsche. “We need to develop more ‘Toledos’, in many shapes and forms.”