Chrysler Shaves Shipping Costs

Chrysler Group has cut transportation costs 15% in two years by sharing trucks and train cars with other units of DaimlerChrysler, redesigning models and getting vehicles to dealers faster, executives said.

The measures will help cut shipping costs, which account for as much as a fifth of the cost of a new car or truck, by 5% next year, said David Hodgson, who oversees worldwide logistics for the U.S.-German company.

Chrysler Group -- maker of Chrysler, Dodge and Jeep vehicles -- is trying to trim expenses to compete as North American automakers spend more offering rebates, low interest rates and other incentives.

The unit has used transportation and other savings to trim its five-year product development costs to $30 billion from $40 billion while adding five models, Chrysler Chief Executive Dieter Zetsche has said.

“Automotive logistics is one of the most inefficient systems on the planet,” said Dan Poole, vice president of equity research at National City Corp., which manages $23 billion, including shares of DaimlerChrysler. “This all makes sense. The only thing embarrassing for the industry is that it wasn’t done 10 years ago.”

A year-old joint venture with Union Pacific Corp. has contributed much of the savings because Chrysler Group can identify transportation problems more quickly, Hodgson said.

The No. 3 U.S. automaker has cut the time it takes to get a model from the factory to the dealership to nine days from 12, cutting about $5 a day from the cost of shipping an auto, he said.

Hodgson is seeking ways to coordinate schedules for auto-related products among Chrysler, Mercedes-Benz, Freightliner and Mitsubishi Motors Corp., the Japanese automaker that is 37% owned by DaimlerChrysler.

Chrysler shaved $20 from the cost of its 2003 Neon by persuading designers to make the small car half an inch shorter, allowing more of the cars to fit in a truck, the executive said. That will amount to $2.5 million next year on unit sales of 125,000 to 130,000.

The company has started loading Jeeps destined for Baltimore from Toledo, Ohio, on Mercedes-Benz trucks that have just carried cars to the Midwest from Baltimore. Jeeps used to go by train from Toledo, and the trucks returned to Baltimore empty. The move cut transport costs 70%, Hodgson said.

Chrysler ships about 11,000 cars and trucks a day from its factories to dealerships and accepts more than 70,000 shipments of parts at its plants, Hodgson said.

DaimlerChrysler shares rose 56 cents Friday to $30.89 on the New York Stock Exchange.