DaimlerChrysler Working with Suppliers to Drive Performance Chrysler Group President and Chief Executive Officer Dieter Zetsche Delivers Speech to Auto Industry Action Group (AIAG) DETROIT, Sept. 1 /PRNewswire-FirstCall/ -- In a speech today at the Automotive Industry Action Group's (AIAG) annual Auto-Tech conference, Chrysler Group President and Chief Executive Officer Dieter Zetsche urged auto industry suppliers to apply greater innovation and work cooperatively with the automakers to maintain U.S. auto-making competitiveness. "It's adapt or die," said Zetsche. "Time and sub-par results are luxuries the North American-based auto industry can't afford. It's a matter of survival." DaimlerChrysler, Ford and GM combine to purchase 80 percent of all U.S. auto parts, relying on suppliers for as much as 70 percent of the components in some of vehicles. "In the past, many of our suppliers provided us with components that were inferior to those they supplied to Japanese automakers. Certainly, we bear some blame. It's our fault that we've accepted poor quality in the past and our designs may have had something to do with many of the poor quality components we received. "Collectively, we set the bar too low. And we both lost." Zetsche said that's why tough-love and sometimes acrimony have displaced warm and fuzzy in industry relationships. He said the Chrysler Group has worked to increase quality, raise productivity, cut costs and streamline operations -- all at the same time and for the long term. "For example, even though we've achieved about an eight-percent improvement in productivity two years in a row, we're still pushing ourselves to do more. We said we would make double-digit improvements in product quality. And we got that two years running as well. It's a bit unrealistic to expect to keep up this pace in a year with the most all-new product launches in the 80-year history of our company. "But, we're not letting up on our product offensive ... we still expect to achieve meaningful gains in both productivity and quality in 2004." Zetsche added that over the last four years, the five-year product plan reduced spending by approximately 30 percent, while increasing the number of new vehicles by about 50 percent. "I don't even want to think of the position we'd be in if we had not pushed ourselves this hard, this fast," said Zetsche. "The reality is that all the hard work necessary to achieve those breakthrough successes is now a daily requirement for us and for each of you. We're all fighting the same battles brought about by cutthroat competition and the need to slash costs, improve quality and innovate in every corner of our industry." Zetsche urged the lunchtime Auto-Tech crowd of more than 1,000 to innovate and work together. "The only way for us to win this war is by working together to find new solutions for the problems that confront us in this industry," he said. "What it comes down to is the need for radical approaches to some nagging problems -- old and new -- that simply aren't going to be fixed through old solutions." One example he pointed to was announced last month in Toledo -- the co- location of three suppliers in new, on-site facilities adjacent to the company's Toledo North Assembly plant. The suppliers will own and operate the Body Shop, Paint Shop and Chassis Assembly operations within the footprint of the Toledo Plant -- the first time suppliers will operate as an integral part of an American auto assembly plant. "We think this a win-win arrangement and one that can be a prototype for many other collaborative partnerships between OEMs and suppliers," he said. The three suppliers at Toledo will invest about a third of the $900 million capital investment for this new facility. In fact, the Toledo complex could see a total investment of $2.1 billion and as many as four new products over the next few years. As many as 12 additional suppliers could become involved in this single project. "This kind of innovation is the road to the future -- for OEMs and suppliers alike," said Zetsche. Zetsche also gave his views on outsourcing. "No free-market enterprise can survive if its costs exceed its revenues in the long term. But, while most of the talk today is about 'outsourcing,' DaimlerChrysler has a very deep-seated interest in 'insourcing' -- much as we did in Toledo," said Zetsche. "I want to stress that our company is as committed as ever to investing in America, building products in America, and keeping jobs in America. That's not just hot air. The results of those commitments are highly visible." Zetsche added that the Chrysler Group has invested, for example, some $6.6 billion in Detroit in the last 12 years in state-of-the art manufacturing facilities like Mack Engine I and II and Jefferson North Assembly. "That is larger than all recent investments in Detroit's new sports stadiums, casinos and riverfront redevelopment combined," he added. "What we really need, more than ever, is to find new ways to make major investments in America, to continue to create high-paying, high-tech jobs within our plants and to continue to compete effectively against global competitors," concluded Zetsche. "We need to develop more 'Toledos,' in many shapes and forms." The Automotive Industry Action Group is a globally recognized organization founded in 1982 by a group of visionary managers from DaimlerChrysler, Ford Motor Company and General Motors. AIAG has nearly 1,600 members, including suppliers, OEMs and small business interested in maximizing their voice in the industry. AIAG provides an open forum where members cooperate in developing solutions that enhance the prosperity of the automotive industry. DATASOURCE: DaimlerChrysler CONTACT: David Elshoff, +1-248-512-2690, or Edward Saenz, +1-248-512-2674, both of DaimlerChrysler Web site: http://www.media.daimlerchrysler.com/

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