Chrysler Group's COO Tom LaSorda Says 'Fully Flexible Corporation' is Key to Weathering Rapidly Changing Market Conditions

* LaSorda outlines Chrysler Group's vision of flexibility: taking lessons learned on the plant floor and applying to entire organization * New business model features the most advanced use of supplier co- location in North America * LaSorda challenges global supplier base to become more flexible

TRAVERSE CITY, Mich., Aug. 4 -- Chrysler Group Chief Operating Officer Tom LaSorda shared his vision of the "fully flexible corporation" in a speech at the Management Briefing Seminars today stating that the concept of flexibility has been incubated on the plant floor, but now has to be spread throughout the entire business model to create greater value and meet the challenges of global competition.

"Our vision of flexibility places emphasis on the customer and the product," said LaSorda, the former head of the Company's worldwide manufacturing operations. "Our goal is to design and build virtually anything, just about anywhere, with improving speed and quality - the emphasis on efficiently maximizing innovation, design and package selection for customers."

To achieve this objective, LaSorda outlined five key applications of flexibility in use at the Chrysler Group. They include: chaining flex - flexibility between plants; volume flex - rebalancing volume within or between plants; platform architecture flex - developing products off interchangeable designs; model mix flex - subassemblies allow differentiation of models, which can be derivatives; and, supplier/component flex - using components to differentiate products.

But in his speech, LaSorda contended that it is the sixth application - business model flex - that is "the unique test of how deeply you can apply flexibility to transform your business."

LaSorda cited the recently announced supplier co-location project at the Company's Toledo (Ohio) North facility as an example of business model flex. Supplier co-location gives suppliers the opportunity to essentially build and manage key manufacturing process facilities totally within a plant "footprint." In this case, three suppliers will individually manage the body, paint and chassis operations, thus assuming the capital investment for those areas.

"By partnering in this way with suppliers for body shop, paint and chassis operations, Chrysler Group is able to optimize capital dollars for investment in future products," said LaSorda. "That's capital spending flexibility. That's reinvigorating our business model."

In the case of the Toledo project, suppliers will invest about one third of the $900 million capital investment needed for the new plant. In total, the two-plant Toledo complex could see a total investment of $2.1 billion and up to four new products over the next several years.

However, LaSorda pointed out that this new model was not only benefiting the Company, but also the suppliers by providing them with new business opportunities to offer innovation and efficiency. In addition, the supplier facilities within the Toledo North plant represent brownfield development, thus reaffirming the Chrysler Group's commitment to urban communities. In fact, 23 of the Company's 24 manufacturing facilities are located in urban communities.

While the supplier co-location project is just the latest competitive advantage at the Chrysler Group, LaSorda pointed to two other examples of how the Company applied the flexibility philosophy to accommodate products that addressed current or emerging opportunities in the marketplace.

He cited the development of the all-new Chrysler and Dodge minivans with the Stow 'n Go seating and storage system, which was completed in an unprecedented 18 months as a result of the collaboration and innovation from a fully flexible and boundary-less development team.

LaSorda also pointed to the work of a team of Chrysler Group engineers who put aside a supplier's design for a key component that controls fuel system vapors, and designed and patented an alternative. The alternative exceeded regulatory standards with reduced complexity and at a 70 percent lower cost than the supplier's proposal. According to LaSorda, that savings of more than $18 million a year will be realized on 2.8 million vehicles beginning in the 2006 model year.

"That's not continuous improvement. That's breakthrough improvement," added LaSorda. "And it represents precisely the results we'll be achieving more and more as the Chrysler Group becomes fully flexible."

LaSorda's final message to the mostly supplier audience: "Embrace flexibility and apply it throughout your business and influence key partners to do the same.

"As a leader, you'll know you're on the right path when your team is invested in the journey, and their certainty that tomorrow will not be anything like today, motivates them to higher levels of performance, greater creativity and full flexibility."