Domestic Carmakers to "Get Tough" With Suppliers– Or Vice Versa
It's no secret that The Big 2.8 have been beating-up on their suppliers for decades, banking profits on the backs of their parts making "partners" by squeezing them for every possible penny (often at the cost of quality). Not to put too fine a point on it, relations between parts providers and American automakers are positively poisonous. So why is Reuters taking the automakers' side in their analysis of supplier – manufacturer relations post-Chrysler – Plastech blow-up? "And the stand-off between the companies will not be the last either, as U.S. automakers — looking to close plants, slash jobs and streamline operations to return to profits — lose patience with financially stressed suppliers." So how does scribe Ben Klayman reckon the suppliers became "stressed" in the first place? Anyway, "that hard line certainly caught suppliers' attention." Yes, but not in the way Klayman suggests. Suppliers are fed-up with Auburn Hill's late payments and now, bully-boy tactics. If they think Chrysler's pulling-out or going under, why wouldn't they get tough? Chrysler could soon learn that Hell hath no fury like a supplier scorned.
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The big problem companies like Plastech have is that their customers have insisted on firm price contracts when the raw materials costs have skyrocketed. Plastic resin prices pretty much follow the cost of crude oil. There are only so many efficiency improvements a factory can make and it is quite possible for raw materials cost increases to consume more than the factory is able to save. Many people don't realize that the Chinese government directly subsidizes the price of fuels inside China and gives export rebates to it's exporting companies. Thus it is possible for a Chinese supplier to quote finished products at less than the international market price for just the raw materials going into that product. For example, look at: http://www.business-in-asia.com/news/plastic_news3.html When automakers push domestic suppliers to meet the "world price" (aka China Price) there really is no place for them to go, except to close up shop and send the equipment to China. Is that really in the long term best interest of the US and it's people?
"So they have been maneuvering themselves into a position where the continued decline of the U.S. economy and increasing regulation, costs, taxes, and unions can no longer threaten their existence." Ironically it is the lessor quality that results from those very same practices and manuvering that will threaten their existence. Yet, companies like Chrysler still wonder why many consumers have either sworn off their products or stay loyal yo Toyota and Honda. Not only is there a good chance they won't survive but frankly with their callous aand predatory practices, they don't deserve to survive.
I don't remember the book or even the author, but it was one of the books by Michelle Maynard or MaryAnn Keller, and in the book the author described being in a meeting of GM contract/engineer people who were laughing about how they'd screwed over a supplier on prices. Not exactly a cooperative and constructive attitude. The Dec. 24, '07 issue of AutoNews (page 8) has a short article about Bennie Fowler who is Ford's VP for quality. Some quotes: --- (Interviewer)"A few years ago, a supplier described you to me this way: 'He's big, he's all muscle; a better job description for him would be vice president of ass-kicking.' (Fowler) "The one thing I'm fortunate to have is I'm 6-4, and I'm 280 pounds. Sometimes when people see me, I don't have to say a word. Their thoughts are just like you mention." --- Now in the Jan. 28, '08 issue of AutoNews (page 8) we have an article about Ford being dead last in supplier ratings according to a J.D. Power survey. Mulally says he's going to fix it. Fowler comes across as a bully, and a bully has no place in job like he has. This can't be news to those above him, so it seems to me his bullying attitude is reflective of his bosses.