Chrysler encourages its largest suppliers to buy more parts from minority businesses

Article by Christian A., on March 23, 2012

Chrysler Group is undertaking serious efforts so that its biggest suppliers would purchase more parts from minority businesses. Purchasing chief Dan Knott said that Chrysler is telling suppliers that if they don’t do this, their business with Chrysler may be lost. Knott, who is 51 years old, manages $90 billion of spending as Chrysler’s head of purchasing.

He said that suppliers are given annual scores on their "minority sourcing performance," which is the amount of business they do with firms that are owned by women or minority group members. Typically, the minority sourcing score represents 5% of the Tier 1's overall score with Chrysler, which has a say on whether a purchase contract is signed.

However, the minority score is raised to stand for 20% of that Tier 1's overall score if the Tier 1 has a minority sourcing score of zero. Knott said that Chrysler is influencing the Tier 1/Tier 2 behavior through the Tier 1's. Last February, Knott was appointed as the chairman of the Michigan Minority Supplier Development Council, a post that he will be keeping until 2013.

Knott was the replacement for Tony Brown, Ford Motor Co.'s head of purchasing, in this position. Chrysler had presented this program last year to persuade Tier 1 suppliers to raise their spending with minority-owned businesses, says Autonews. On the first year, the program boosted Chrysler's annual spending with minority suppliers (for Tier 1 and lower) by $915 million for a total of $4 billion.

This expanded the share of its total spending getting to Tier 2 minority suppliers by 80% for a total of $1.9 billion. In a conference last February, the Original Equipment Suppliers Association was told by representatives from domestic and foreign automakers and suppliers that automakers normally had minority spending targets of 8 to 10% of their overall spending and that their targets for their Tier 1 suppliers was at 5 to 10%.

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