Tag Archives: General Motors

Does Whitacre bring hope to GM’s suppliers?

One of the most frustrating things for suppliers to General Motors has been a track record of promising better relationships and delivering more of the same or even worse terms and conditions. Oddly, the upheaval of bankruptcy and a federal bailout had actually had started to crack that vicious cycle, and the permanent appointment of Ed Whitacre as CEO actually offers hope that changes will stick.

As The New York Times reported, Whitacre has a great opportunity as an outsider to question past practices and make significant changes. And his record at AT&T supports changes for the better for suppliers.

At AT&T Whitacre concentrated on promoting diversity within SBC companies and suppliers. Fortune and Working Woman magazines, along with the Women’s Business Enterprise National Council, the National Minority Business Council, and the National Minority Supplier Development Council recognized these efforts. Under Whitacre’s guidance SBC Communications’ supplier diversity program won the prestigious Ron Brown Award for outstanding corporate citizenship.

Whitacre’s ability to commit, resource and drive a supplier development initiative demonstrates that there is potential for GM to commit to an initiative to develop a strong supply chain with suppliers making investments, innovating and striving to achieve cost and value improvements.

With momentum strongly moving the auto industry to radically different powertrains, there is tremendous pressure for innovation throughout the automotive supply chain. That requires significant investment, trust and strong commitments for the future.  If Whitacre commits to a supplier relationship development program and drives it with the same energy that he did with the supplier diversity program at AT&T, GM  and it’s suppliers will be in a position to achieve competitive advantage.

Actual Change in GM Supplier Relations?

One of our mantras here is that suppliers don’t give their best ideas to their worst customers, and buried in the last four paragraphs of this story in the New York Times today is a hint that maybe General Motors has come to the same conclusion.

A Flush G.M. to Lavish Cash on New Vehicles

Talking about a new Cadillac in the works that is supposed to compete head-to-head with the BMW 3-series of sports sedans, Mark Reuss was quoted as saying, “G.M. will pay top dollar if it gets the most advanced technology before other automakers.”  That’s a huge break from what the Times described as the old GM tactic of writing out a spec for a part, and shopping for the lowest bid.

Of course, he is talking about one model car in a premium brand. The real test will be if GM spreads this approach across its brands, and if the supply chain be able to support and contribute to the innovation.

It is likely that new electric and hydrogen cars will require a whole new supply chain and supply base who in collaboration with GM can bring new solutions to the market place.  When I look at the history of the domestic automotive supply chains, suppliers have not been really collaborating partners.
This article is the first visible evidence that there may be significant changes in the works.  I am wondering if the transformation will require current
suppliers to adapt, or if new suppliers will be taking their place.

We will be watching this carefully.

Think “Low Cost Supplier” not “Low Cost Country”

I’ve been on Internet radio talking recently talking about the change at the top of global procurement at GM — and what that means to the huge push they had been making to source from China and other low-cost countries.
This excerpt from a column by an ADR International colleague based in Prague, Czech Republic makes a good point about that. Here’s the excerpt and a link:

“Experience shows a clear erosion of the traditional split between low-cost and high-cost countries, as many suppliers in emerging countries are unable to deliver benefits because of poor performance and productivity and high logistics costs.

Buyers are therefore seeking companies which offer the most advantageous relationships, whether they are located in an emerging region or, for example, Western Europe.

Global companies such as Unilever, for example, no longer focus on regions or countries. Instead they use a database of vendors capable of supplying their global network for best total costs no matter where the vendors are located.

Of course, this requires active and capable sourcing resourcing all around the world.

It should be borne in mind that low-cost status does not last forever. Every country wants to move from being regarded as emerging to being seen as developed. Some countries, South Korea, Singapore or some central-European nations, for example, have already achieved this.

The US has benefited from a weakening dollar for a couple of years, while Europe became very expensive with its Euro. In recent months currency rates are moving even more into foreground. Economic crises have caused a substantial fall in the value of some currencies such as the UK pound and some central-European currencies.

Nevertheless this brings unexpected opportunities. Offerings that appeared lucrative a month ago may mean a loss today or next month.
The global economic downturn has brought the factors of trust and reliability into focus. The ability to deliver goods and the ability to pay have increased the need for trust and risk mitigation.

Such proven business relationships will last even when the economy recovers, and risk management with those companies which have proved they can deliver the goods will be more important in the future.”
Robert Sobcak, ADR International, Prague.

Link: Think Company, Not Country

How “New” is the New GM?

It’s obvious a lot of us are waiting to see how “new” the new GM is going to be in its supplier relations. Jason Busch recently chimed in with this posting. (The link is also in my link list.)

I’ll be talking about GM and supplier relationships in general in a few weeks with Jon Hansen at Procurement Insights’ Internet radio show. More on that as we firm up the details.

So long, Bo

Nobody should be surprised by the news from General Motors that the global purchasing czar, Bo Andersson has abruptly left the company “to pursue other career interests.”

[See Crain’s Detroit Business: http://www.crainsdetroit.com/article/20090612/FREE/906129997/-1 ]

Andersson came from the school of thought where squeezing razor thin supplier margins, bankrupting suppliers and pushing undercapitalized vendors was the order of the day. Clearly that approach cannot be sustained.

Domestic automakers are realizing that the supply chain will be playing an increasing important role in the future. The new era will bring suppliers with healthy margins, viable suppliers, innovation, and value based purchasing.

With R&D dollars scarce, OEM’s need suppliers to bring them innovations and no smart supplier is going to send its best new technology to its worst customer.

It does not surprise me that both Chrysler and GM appear to be making the necessary changes in purchasing to create a better culture for supplier relationships.  We’ll have to see if they can make the changes stick.

(Find a longer version of this article on Mlive.com — with suggestions for the new czar, Bob Socia.)

Follow the Money When You Rescue Detroit’s Big 3

People throughout the Midwest are stunned by the barrage of questions hurled at the captains of the automotive industry by Washington insiders, but there is a question that hasn’t been asked that probably should be: Where is the money going to go?
All three Detroit companies argue that they are the engines behind a huge supply chain of companies that forms the backbone of the U.S. manufacturing base. And while that still has some truth, the fact is that GM, Ford and Chrysler have all been backing out of U.S. manufacturing for years.
Caught between the unrelenting cost pressure of foreign manufacturers and union, pension and health obligations that could take a generation to shed, Detroit’s original equipment manufacturers, or “OEMs” have enthusiastically embraced the strategy of sourcing parts from low-cost countries. They started in Mexico, but over time, they have pushed suppliers to eastern Europe, China and other Asian sources.
Three years ago Bo Anderson, General Motors vice president of global purchasing and supply, proudly announced that GM had increased the share of parts it sources from low-cost countries, saving from 20% to 30%. He said to GM’s supply base, “if you are a world-class runner, your competition is global.”
Just last August, John Campi, Chrysler executive vice president of procurement, said Chrysler aims to cut supply chain costs by 25%.
In a way, the strategy of price-buying and low-cost-country sourcing has decimated and bankrupted the entire supply chain.  It is not difficult to understand that a bankrupt supply chain eventually worked its way up to the Big 3.
The key question that comes to mind as these executives prepare their plans to save the industry is: How much of the federal tax money will flow down the supply chain, and where precisely will it go?
Will the strategy of off-shore sourcing continue under the federal assistance? Members of Congress and others argued that funds shouldn’t be subsidizing job banks in America where people are paid for simply showing up. Should they instead be subsidizing factories in China, Russia or Vietnam?
Congress seems to be insisting that the industry restructure itself, but the way that is going now is by driving the automotive supply chain overseas. If the national interest in the automotive industry is to maintain and grow a domestic manufacturing base – how does that reconcile with the direction the industry has been heading for a decade?