John FeliceJohn FeliceVice President Manufacturing, Technology & Global EnterpriseChrysler Corporation LLC
Vice President Manufacturing, Technology & Global EnterpriseChrysler Corporation LLC
C H R Y S L E R G R O U P
Chrysler Group’s Flexible Manufacturing Strategy
May 17, 2007
John Felice
Vice President – Manufacturing, Technology & Global Enterprise
Chrysler Group
C H R Y S L E R G R O U P
Market and Competitive Challenges
Tough Competition
Government Regulation
Consumer Demand
SupplyChain
C H R Y S L E R G R O U P
• Aligning capacity, cost structure and capital spending with market demand
Increase efficiency of all aspects of the business
• Strengthen and increase revenues and margins
• Global market opportunities with low cost sourcing
• Strong product pipeline
• $3 billion powertrain investment leads to a more fuel efficient product lineup
• Dealer network optimization
Recovery
• Short-term progress on profitability
• Return on sales of 2.5% by 2009
Strategic Transformation
• Mid-term change of business model
• Achieve and sustain benchmark performance
RTP Focuses on Short- and Long-Term Goals
C H R Y S L E R G R O U P
WM1 Product Strategy / Portfolio Management
Capital ManagementWM7
Fixed Cost ManagementWM2
Structural Changes / Manufacturing
WM3
Material Costs Management
WM4
Revenue ManagementWM5
QualityWM6
Chrysler Group Executive Committee
WM – Work Module
Seven Work Modules Focusedon Short- and Long-Term Improvements
These work modules are sub-divided into teams that are working on tackling costs, improving quality and efficiency and enhancing revenue across the entire scope of the company
Pro
gra
m O
ffic
e
C H R Y S L E R G R O U PRedesigned Business Model Supports Long-Term Growth
Current Redesigned Business Model
Product-centric
Product + Customer and brand focus
NAFTA-centric NAFTA + Global balance
Internal resource
drivenInternal + Alliances and partnerships
• Customer driven products and processes • Clearly defined uniquely American brands• High brand equity and customer loyalty
• Manufacturing, supply and sales footprints optimized (balanced) to maximize global growth and profitability
• Leveraging partnerships to manage costs• Creative and efficient use of alliances to quickly respond to geographic, market segment, and product opportunities
C H R Y S L E R G R O U P
How Does DaimlerChrysler Respond Effectively and Efficiently
to Market Conditions and Volume Fluctuations ?
C H R Y S L E R G R O U P
Flex Target State
FLEX OPPORTUNITIES KEY QUESTIONS
How do you develop an optimum number of
quality products efficiently?
How do you best use the existing asset base to
build products in response to market demand
swings quickly?
How do you globally leverage the best cost-
saving sourcing opportunities through volume
bundling and commonization?
How do you offer consumer-driven product
lines that can achieve geographic and market
segment opportunities?
How do you achieve better global balance and
leverage partnerships to manage cost and seize
growth opportunities?
Product Development
Flex Manufacturing
Global Sourcing
Product Portfolio
Global Alliances & Partnerships
C H R Y S L E R G R O U PName of the Game: Increase Products, Decrease Capital Spending
$41.9
$30.7 $30.1
2000Plan
2002Plan
2005Plan
28%
“Do More” “Use Less”
2000-2004Plan
2002-2006Plan
2005-2009Plan
21
24
32 52%
C H R Y S L E R G R O U P
How Does DaimlerChrysler Respond Effectively and Efficiently
to Market Conditions and Volume Fluctuations ?
C H R Y S L E R G R O U P
Product Development
3
2
2
2006 2012
712
RWD UNIBODY3
FWD UNIBODY5
BODY-ON-FRAME4
Optimize Vehicle Platforms:Reduce Number of Platforms from 12 to 7 by 2012
C H R Y S L E R G R O U P
Reduce Build Combinations
Build-in Quality and Manufacturability
Reduce Number of Parts
Reduce Parts Proliferation and the Number of Designs
for Each Commodity
Increase Common Parts Sharing
Product Development
Reduce Design Complexity
Dodge Nitro:From 167,424
possible configurations
to 650
C H R Y S L E R G R O U P
How Does DaimlerChrysler Respond Effectively and Efficiently
to Market Conditions and Volume Fluctuations ?
C H R Y S L E R G R O U P
Body-on-frame Arch
Model
Model
Model
Model
Model
Model
Model
Model
Model
Unibody Arch #1
Model
Unibody Arch #2
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Model
Other Arch
Flexible Manufacturing
Basis: Create a Flexible Manufacturing System to Support a Broad Product Portfolio and Pull-based Marketing Model
Create FlexibleProduct and
Manufacturing Footprints on a
Global Basis
• Converge product portfolio into 4 potentially basic architectural families
• Create flexible manufacturing base aligned to architecture
PlantA
PlantB
PlantC
PlantD
PlantE
PlantF
PlantG
PlantH
PlantI
PlantJ
PlantK
PlantL
PlantM
PlantN
C H R Y S L E R G R O U P
Enabler 1: Standardize on a Competitive Common Bill of Process to Drive Manufacturing Flexibility, Efficiency, Quality and Product Design
Provide a Common Mainline Manufacturing System:
- Operational Sequence
- Operation Content & Dimensional Strategy
- Assembly Process that Optimizes Unibody/BoF Portfolio
- Common Process Framework for Subassemblies
- Machine, Equipment, Tooling, Controls & Facilities Guidelines
- Scope Covers Dies, Stamping, Body Structures and Closures,
Paint, Trim, Chassis, Final, Powertrain, etc.
- Catalog of Technology
Flexible Manufacturing: Common Bill of Process
C H R Y S L E R G R O U P
Enabler 2: Build a Flex Body Shop Process to Allow for Platform Derivatives and Reduce New Model Changeover by Leveraging Key Advances in Robotics
Key Developments
in Robotics:
- More Payload
range
- More powerful
Controllers
- Reduced Cost
300400
500600
700
Payload Capability(Kilograms)
1990’s 2006
PayloadCapability
Cost
30%
Multiple Model
Flexibility
Standardize Common
Core Processes to
Build 3 Platforms/ 4 Models
Build Old/New
Models Concurrently
Produce Models from
0–100% of Capacity
Flexible Load and
Weld Processes Using:
- Robotic Hand-off
- Geo End-effectors
133%
Flexible Manufacturing: Flex Body Shop
C H R Y S L E R G R O U P
Enabler 3: Plant Charter – Blueprinting Each Plant’s Build Capability to Accommodate Flexible Product Requirements
IMPLEMENTATION TIMING & COST
PRODUCT MAX DIMENSIONS: L/W/H
PLANT CAPACITY, PLANNED VOLUME
PLANT’S CAPABILITY
SHIFT PATTERN
PRODUCT LINE UP CAPABILITY & “PROTECT FOR”
BILL OF PROCESS CONFORMANCE,
ASCENDING ORDER
PLANNED TECHNOLOGY LEVEL
MIX FLEXIBILITY, ASSET UTILIZATION
Flexible Manufacturing: Plant Charter
C H R Y S L E R G R O U P
Enabler 4: Chaining – Best Utilization of Existing Asset Base, Applying FlexibilityWithin and Between Plants Without Facility Expense
LEAN MANUFACTURING
BILL OF PROCESS
FLEXIBLE MANUFACTURING
Plant
Charter A
Models
Vol
ume
PLANT A
Plant
Charter B
Models
Vol
ume
PLANT B
ABC
Plant
Charter C
Models
Vol
ume
PLANT C
ABC ABCD
Demand Swings
Model Mix
Asset Leveling
Flexible Manufacturing: Chaining
C H R Y S L E R G R O U P
Operators
Supervisors
Support Functions:Quality, Maintenance,
PC
Operations, Engineering
Smart Manufacturing Operational Focus
Traditional
Smart
TeamMember
C H R Y S L E R G R O U P
How Does DaimlerChrysler Respond Effectively and Efficiently
to Market Conditions and Volume Fluctuations ?
C H R Y S L E R G R O U P
Global Sourcing
Basis: Flexible Manufacturing & Product Development Lay the Foundationfor Global Sourcing
• Volume Bundling
• Cost Savings
Opportunities
• Global Sourcing
Leveraging
Low Cost
Strategies
Chaining (Plant to Plant Flex) Volume Flexibility
Architecture/ Platform Flexibility Model Flexibility
Bill of Process More Common Tools & Equipment
Global Design Commonization More Common Parts
REDUCE COMPLEXITY LEVERAGE THE BEST DEAL
C H R Y S L E R G R O U P
Global Sourcing: Manufacturing Example
Standardization of Manufacturing Requirements Has Enabled the Bundling of Manufacturing Equipment Across Platforms/Plants
BIW Roller Transfer Standardization across vehicle lines/plants
Vehicle Lines Covered
Typical Placement Volume/Design Complexity
Prior:
New:
• Transfer sources vary by plant
• Common transfer source for 5 plants
Mid-Size Car, Truck,Minivan Plant Bodyshops
Volume Change Average Price Change
+ 500%-22%
-
Weld Gun Standardization across vehicle lines/plants
Vehicle Lines Covered
Typical Placement Volume/Design Complexity
Prior:
New:
• 300 guns per placement• Avg. 200 unique designs
• 1600 guns bundled• 12 base gun designs
All Chrysler Group Vehicle Lines, Stamping & Bodyshop Requirements
Volume(Guns per Design
Per Placement)
Average Price Change
133 guns per designper placement
-30%1.5 guns per design per Placement
C H R Y S L E R G R O U P
Global Sourcing: Vehicle Part Example
Global Design Commonization of Door Latches Drives Significant Cost and Complexity Reduction
Before, each business unit had similar latch
concepts, but different parts and variants
Now, DCX has one common global latch concept
with 83% common parts for all three business units
Economical advantages of GL1 through significant
reductions:
- from 400 down to 100 parts
- from $35 down to $25 per car
- from 3 down to 1 supplier
- CG Savings: $10 M (2007), $24 M (2009)
All new CG, MCG and CVD-Van models will be
equipped with GL1 by 2010; CG launch with Dodge
Caliber
CVD
MCG
CG
GL1
C H R Y S L E R G R O U P
How Does DaimlerChrysler Respond Effectively and Efficiently
to Market Conditions and Volume Fluctuations ?
C H R Y S L E R G R O U P
Product Portfolio
We Have the Tools & the Knowledge to Leverage Flexible Strategy to Drive Business Opportunity in NAFTA
Avenger
Grand CherokeeCRD Magnum
Freshening
Sebring Convertible
Liberty
Ram 4500/5500 Chassis Cab
DakotaFreshening
Viper SRT10
SprinterTown & Country
Caravan Caliber SRT4
300 & Charger
Freshening
JAN FEB MAY JUNAPR JUL AUGMAR OCT DECNOVSEP
New
New
NewNew
New
New
New
New
Continuing the Product Assault in 2007:
C H R Y S L E R G R O U P
2003 MY 2007 MY 2003 MY 2007 MY 2003 MY 2007 MY
Total Vehicles RHD VehicleOfferings
Diesel VehicleOfferings
20
6
18
4
16
9
Product Portfolio
We Have the Product Expansion Strategy to Increase Offerings and Drive Business Opportunity in NAFTA and Established Markets Overseas
C H R Y S L E R G R O U P
Product Portfolio
Fuel Price Pressures
Pri
ce P
er G
allo
n
A Crowded Marketplace, Growing Globally
$2.80
$2.30
$1.50
$1.75
$2.00
$2.25
$2.50
$2.75
$3.00
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
Our Flexible Strategy Must Be More Flexible in the Face of High Fuel Prices and Global Competition
C H R Y S L E R G R O U P
Room for Growth in Small Segment
Pickup
SUV
Minivan
70% of Chrysler Group
Sales
CG Product Line, Sales
Dominated by Bigger
Vehicles
Product Line is NAFTA-
Centric; Not Balanced for
Global Growth
Small
Compact
Mid-size
Full-size
Passenger Family Truck/Van
Our Product Portfolio Must Be More Flexible to Meet New Domestic Demand or Leverage New International Markets
C H R Y S L E R G R O U P
Product Portfolio
Our Strategy:Global Balance
Defend/grow NAFTA CG strongholds
Add new non-NAFTA vehicle programs crucial to
global expansion
Leverage 3rd party alliances to cost-effectively
access regional products/markets
$5+ billion additional purchasing to low cost
sources – balance supplier footprint
C H R Y S L E R G R O U P
How Does DaimlerChrysler Respond Effectively and Efficiently
to Market Conditions and Volume Fluctuations ?
C H R Y S L E R G R O U P
Select Regional Expansion
Global Alliances & Partnerships
Leveraging partnerships for growth and to manage costs Creative, efficient use of alliances to leverage geographic/market segment/product opportunity
Strong NAFTA Position
Small Vehicle B Segment Chery Motors, China
Manufacturing (300C, Jeep) Magna, Austria
Retail Network Marketing Hyundai in Mexico
Internal Manufacturing Minivan Assembly for VW
Diesel BlueTec Engine Cummins, MCG
Focused Alliances GEMA World Engine (HMC, MMC)
Hybrid GM, BMW