Ken K
31st January 2006, 01:49 PM
The message seems loud and clear...
Lear left reeling from Dodge Ram snub
David Barkholz
Robert Sherefkin
Automotive News / January 30, 2006 - 6:00 am
DETROIT -- Lear Corp.'s recent pricing dispute with the Chrysler group has cost the seat supplier a share of one of the industry's most-anticipated new-vehicle programs.
Just weeks after Chrysler went to court to force Lear to continue shipping parts, the automaker replaced Lear as a supplier of seats and interiors for the next-generation Dodge Ram pickup.
Johnson Controls Inc. will supply seats and Visteon Corp. will supply door trim and cockpits for the new Ram, which will go into production in 2008.
The loss of the next-generation Ram interior -- said to be worth an estimated $400 million a year -- is a serious blow to Lear. Like many other U.S. suppliers, the Southfield, Mich., seat maker has been hammered by Big 3 production cuts and rising raw material costs.
Last week, Lear posted a fourth-quarter net loss of $596.6 million, including one-time charges of $423.7 million before taxes. Lear has announced plans to close or consolidate 20 plants and wants to spin off its unprofitable interiors business.
'We're not vindictive'
Chrysler group spokesman Jason Vines denied any connection between the Ram contract and last year's pricing dispute with Lear.
"We're not vindictive," he said. "They bid on it, but they lost out because they didn't have the right product, the right quality and the right cost. Theirs wasn't the best bid, and we went with the best."
In an interview last week with Automotive News, Lear CEO Bob Rossiter said he accepts Chrysler's version of events. But an industry consultant familiar with the project said Chrysler made an example of Lear. The contract, the source said, was Lear's to lose.
The pricing dispute flared up last year after several Lear suppliers threatened to halt parts shipments unless they received immediate price increases to offset increases in raw material costs. Lear asked the Chrysler group to share the burden, and Chrysler sued Lear on Dec. 2 to ensure an uninterrupted delivery of parts.
The companies settled last week without disclosing terms, but the damage had been done. Chrysler selected Johnson Controls to produce seats for the next-generation Ram and Visteon to supply the door trim and cockpits.
The Ram contract is coveted by suppliers. Last year, the Chrysler group sold 400,543 Ram pickups. In a crowded U.S. market, only three light-vehicle nameplates did better in 2005: the Ford F series, Chevrolet Silverado and Toyota Camry.
Rossiter was scheduled to meet with Chrysler group CEO Tom LaSorda this week to patch up relations. Rossiter said Lear still may be able to supply some parts for the future Ram to Johnson Controls and Visteon.
It is unusual -- but not unprecedented -- for a major supplier to be ousted on a replacement vehicle, said Kevin Tynan, an analyst with Argus Research Group in New York. Typically, automakers want to use as many carryover parts as possible on a redesigned vehicle. That saves time, cost and quality while preserving continuity.
Terrible timing
The loss of the next-generation Ram pickup could weaken Lear's already troubled financial outlook. The company posted a $1.37 billion net loss for 2005, compared with a profit of $422 million the previous year. The results for 2005 included one-time charges of $1.24 billion before taxes.
Lear's dispute with Chrysler won't help. The Ram has been a marquee platform for Lear since 1994, and Chrysler has been a key customer. In 2004, DaimlerChrysler accounted for 12 percent of Lear's global sales.
Mostly on the strength of its sizable Big 3 business, Lear ranks No. 7 on the Automotive News list of the top 100 global suppliers with original-equipment automotive parts sales of $17.0 billion in 2004.
But Lear's rivals are gaining ground. In a speech on Aug. 3, Chrysler purchasing chief Peter Rosenfeld named Johnson Controls and Magna International Inc. as "high-performance suppliers," giving them a voice in the early stages of Chrysler's product development.
Then Rosenfeld named Johnson Controls and Magna as suppliers for an undisclosed crossover vehicle to be launched in 2008. Johnson Controls will make the seats, and Magna will supply the cockpit.
Rossiter acknowledged that Lear has suffered its share of reverses over the past year. "Everything that could go wrong, went wrong," he said. "But I think we can replace the (Ram) business in the long run, and we can straighten out our relationship with Chrysler."
Lear left reeling from Dodge Ram snub
David Barkholz
Robert Sherefkin
Automotive News / January 30, 2006 - 6:00 am
DETROIT -- Lear Corp.'s recent pricing dispute with the Chrysler group has cost the seat supplier a share of one of the industry's most-anticipated new-vehicle programs.
Just weeks after Chrysler went to court to force Lear to continue shipping parts, the automaker replaced Lear as a supplier of seats and interiors for the next-generation Dodge Ram pickup.
Johnson Controls Inc. will supply seats and Visteon Corp. will supply door trim and cockpits for the new Ram, which will go into production in 2008.
The loss of the next-generation Ram interior -- said to be worth an estimated $400 million a year -- is a serious blow to Lear. Like many other U.S. suppliers, the Southfield, Mich., seat maker has been hammered by Big 3 production cuts and rising raw material costs.
Last week, Lear posted a fourth-quarter net loss of $596.6 million, including one-time charges of $423.7 million before taxes. Lear has announced plans to close or consolidate 20 plants and wants to spin off its unprofitable interiors business.
'We're not vindictive'
Chrysler group spokesman Jason Vines denied any connection between the Ram contract and last year's pricing dispute with Lear.
"We're not vindictive," he said. "They bid on it, but they lost out because they didn't have the right product, the right quality and the right cost. Theirs wasn't the best bid, and we went with the best."
In an interview last week with Automotive News, Lear CEO Bob Rossiter said he accepts Chrysler's version of events. But an industry consultant familiar with the project said Chrysler made an example of Lear. The contract, the source said, was Lear's to lose.
The pricing dispute flared up last year after several Lear suppliers threatened to halt parts shipments unless they received immediate price increases to offset increases in raw material costs. Lear asked the Chrysler group to share the burden, and Chrysler sued Lear on Dec. 2 to ensure an uninterrupted delivery of parts.
The companies settled last week without disclosing terms, but the damage had been done. Chrysler selected Johnson Controls to produce seats for the next-generation Ram and Visteon to supply the door trim and cockpits.
The Ram contract is coveted by suppliers. Last year, the Chrysler group sold 400,543 Ram pickups. In a crowded U.S. market, only three light-vehicle nameplates did better in 2005: the Ford F series, Chevrolet Silverado and Toyota Camry.
Rossiter was scheduled to meet with Chrysler group CEO Tom LaSorda this week to patch up relations. Rossiter said Lear still may be able to supply some parts for the future Ram to Johnson Controls and Visteon.
It is unusual -- but not unprecedented -- for a major supplier to be ousted on a replacement vehicle, said Kevin Tynan, an analyst with Argus Research Group in New York. Typically, automakers want to use as many carryover parts as possible on a redesigned vehicle. That saves time, cost and quality while preserving continuity.
Terrible timing
The loss of the next-generation Ram pickup could weaken Lear's already troubled financial outlook. The company posted a $1.37 billion net loss for 2005, compared with a profit of $422 million the previous year. The results for 2005 included one-time charges of $1.24 billion before taxes.
Lear's dispute with Chrysler won't help. The Ram has been a marquee platform for Lear since 1994, and Chrysler has been a key customer. In 2004, DaimlerChrysler accounted for 12 percent of Lear's global sales.
Mostly on the strength of its sizable Big 3 business, Lear ranks No. 7 on the Automotive News list of the top 100 global suppliers with original-equipment automotive parts sales of $17.0 billion in 2004.
But Lear's rivals are gaining ground. In a speech on Aug. 3, Chrysler purchasing chief Peter Rosenfeld named Johnson Controls and Magna International Inc. as "high-performance suppliers," giving them a voice in the early stages of Chrysler's product development.
Then Rosenfeld named Johnson Controls and Magna as suppliers for an undisclosed crossover vehicle to be launched in 2008. Johnson Controls will make the seats, and Magna will supply the cockpit.
Rossiter acknowledged that Lear has suffered its share of reverses over the past year. "Everything that could go wrong, went wrong," he said. "But I think we can replace the (Ram) business in the long run, and we can straighten out our relationship with Chrysler."
