Chrysler Struggling To Pay Suppliers On Time

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What's Next In Payments®
6:00 AM EST May 12th, 2014

Due to technical snags with a new software system, Chrysler is struggling to pay suppliers on time. The software program began on January 1st for about 1,500 suppliers.

Walldorf, Germany-based SAP, designed the invoice and payment system, PentaSAP. The issues occur when suppliers submit invoices through the system, then they are rejected for reasons that are hard to determine.

“I recognize, and frankly apologize, for the payment issues we have had with suppliers,” said Jay Wilton, vice president of purchasing for Chrysler. “We appreciate the fact that they have been patient.”

There is a range of small businesses that are suppliers, from plant equipment to engineering services and equipment purchases to landscaping. The suppliers that have experienced the most pain from the issue in funding are mostly small businesses.

Chrysler purchases about $7 billion annually in goods and services from these suppliers.

A technology supplier said that his invoices haven’t been paid anywhere close to on time for many months.

“They continually assure us that this is all just the result of switching systems and that a fix is ‘around the corner,’ but it takes an act of God to get them to go above and beyond and expedite payments,” said the executive, who did not want to be identified.

The first phase of the system launched last year for Chrysler’s large Tier 1 parts suppliers. Most companies that experienced similar issues, had the problems were resolved. The second phase of the project has been more difficult both for the automaker and its suppliers.

The second phase, covers about 1,500 indirect suppliers and of these, 50, or 3%, have not been paid this year. The remainder has been paid for some of their work, but in some cases, not all.

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