Chrysler: Farming out Jeep operations saved $300 million

David Barkholz | AUTOMOTIVE NEWS, TOLEDO, Ohio -- The Chrysler group's unique relationship with suppliers at the just-opened Jeep Wrangler assembly plant here saved the carmaker $300 million in capital that was redeployed for product development and other uses, says Frank Ewasyshyn, Chrysler executive vice president of manufacturing.

Suppliers spent the $300 million to build the plant's body shop, paint shop and chassis-building operation, he said. Those suppliers now are operating those facilities, while the Chrysler group concentrates on assembling on site the redesigned Jeep Wrangler and new Wrangler Unlimited. Both are to go on sale next month.

The Chrysler group spent $600 million to build and equip the assembly portion of the Toledo Supplier Park. The plant replaced an antiquated Jeep assembly plant nearby.

Ewasyshyn said preserving capital was a key component of the new assembly model.

"You can put back what you save in more products," he said before ceremonies marking the opening of the plant today.

Kuka Flexible Production Systems Corp. is producing the Wrangler bodies, Magna International Inc.'s Magna Steyr is running the paint shop, and a subsidiary of Hyundai Mobis is building the chassis. A carmaker traditionally builds the operations and runs them.

But the new model is working out well, said Larry Drake, president of Kuka's North American operations.

Drake said about 85 percent of bodies welded in the plant need no refining or rework. That's a high percentage for a new assembly plant launching a new model, he said.

Kuka is a world leader in building welding lines for body shops. This is its first time as a production parts producer. Drake said that, like any parts producer, Kuka gets paid for its investment as a portion of the piece price for each body. That's different from getting paid when it delivers the machinery and sets it up in a carmaker's assembly plant.

After Kuka builds the vehicle bodies, they are conveyed to the Magna Steyr paint shop. The bodies then are sent by conveyor to the Chrysler group's assembly plant, where they are mated to the finished chassis that the Hyundai Mobis operation sends to assembly. The Wrangler comes in a variety of four-door and two-door versions.

In all, Chrysler is investing $2.1 billion in its Toledo assembly operations, including the costs of developing products there.