GM to Suppliers: Open Your Factories, Books If You Want Long-Term Business
If you’re a parts supplier to General Motors, you have two choices: bid for business as it comes up or open your books and factories to skip the bidding process.
According to Automotive News, the latter option is part of GM’s One Cost Model launched in 2013, allowing the automaker to analyse a supplier’s internal cost data to identify cost-cutting opportunities. In exchange, suppliers can receive exclusive parts contracts that can last the lifecycle of a model and GM will not put that particular piece of business up for bid.
This all requires a significant amount of trust from suppliers, a commodity which has been lacking at GM since the ’90s.
Purchasing chief Steve Kiefer, formerly an executive at Delphi, told AN that GM won’t use the information to force suppliers to match or beat the company’s “China price”. In some contracts, annual price-downs, resulting in price cuts of 1 to 4 percent, will be skipped. Instead, GM will use the data to “identify waste and continuous improvement opportunities,” Kim Brycz, executive director of global product purchasing, told AN.
Bidding is effectively replaced with annual cost analyses. GM is also including suppliers earlier in vehicle programs with both parties reaping rewards: suppliers can optimize parts earlier on and GM can pay less for the same part.
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Anyone claiming that Honda does the same as GM vis-a-vis supplier is ignorant, at best, and willfully lying, at worst. The responses, year after year, of Tier 1 and Tier 2 suppliers, are the closest thing to universal as things get in the component fabrication and supply business, and any sane supplier having the choice would rather work with Honda, by a country mile (or ocean's width's distance) than GM, for many reasons, not the least of which is that Honda lends support to improve efficiency and quality to suppliers (using competent Honda engineers) PRIMARILY TO IMPROVE HONDA VEHICLE QUALITY, NOT SHAVE THE SUPPLIER'S PRICE DOWN TO FRACTIONS OF PENNIES, unlike GM, which essentially wants lowest cost bids above all else. I'd love to hear Tresmonos weigh in on this.
Open your books to GM ? I've seen a few contracts from big companies and suppliers. I liked one where anything WE learn from you that isn't marked "confidential" and countersigned by us isn't, BUT anything you learn from us IS "confidential" unless countersigned by US that it isn't. An amazing one way valve for technology theft, er, tranfer. This bomb was buried in the definitions section. Likewise, I had a conversation with a headlight supplier. One of the Big Three stopped buying the reflectors he sold. They hired his head man at 3x salary and stole his whole process. He had to hire patent and trademark attorneys to fight what was a clear theft of his proprietary information. The Big One just figured it was easier to steal and fight than pay for the process. Fox...Henhouse
Dear TTAC, More posts like this please. It reminds me of the old TTAC where I could get a glimpse inside the auto industry. I have also enjoyed following the travails of GM since back in the old Robert Farago days.
Perhaps I am mis-remembering but it seems to me that Sears started doing something very much like this many years ago. I'm sure it worked out very well for them.