The New Chrysler Way

Chrysler has a new eight-year agreement that has the potential to radically change the way Chrysler--and all automakers--build vehicles, finance their factories and manage labor. The main idea: Let others shoulder the capital and labor costs of building a car.

ather than buy parts and the machinery to assemble them into vehicles, Chrysler will outsource 60% of the production responsibility for a new Jeep Wrangler--and many of the factory jobs--to its suppliers. Those companies will have to put up the capital for machinery and pay the workers. By enlisting suppliers as partners, Chrysler will shed one-third of the $900 million capital investment for the new Jeep factory.

The idea is based on the premise that when suppliers are left to themselves they will design, build and operate a factory more cheaply than their customers can. "If you ask them to do it for themselves, you'll be surprised how much the price comes down," says Chrysler Group Chief Executive Dieter Zetsche. It's the same reason a housing contractor is likely to design his own home with more care and for less money than he would charge others.

My question is: "What does this really mean?"

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