By on July 13, 2016

2016 GMC Sierra with eAssist, Image: General Motors

A Massachusetts-based parts supplier you’ve probably never heard of could force General Motors’ entire North American operation to grind to a halt.

Clark-Cutler-McDermott Co. stopped making acoustic insulation and trim pieces for GM vehicles on Friday after declaring Chapter 11 bankruptcy, a situation it blames on money-losing contracts signed with the automaker, a source told The Detroit News

The supplier’s parts are found in almost every U.S. vehicle GM builds. With its workforce now laid off, and the supply chain disrupted, GM faces a grim situation — a shutdown of its assembly operations and millions of dollars in losses per day.

GM went to a U.S. District judge last month to impose a temporary restraining order on Clark-Cutler-McDermott, but that order expired at the beginning of the week. The supplier previously shut down on June 17, but the legal intervention briefly kept the supply of parts flowing.

In a court filing obtained by The Detroit News, GM spells out how serious the situation is:

A continued disruption in the supply of component parts will also cause a catastrophic disruption in the supply chain and the operations of countless GM suppliers, dealers, customers, and other stakeholders, including the potential layoff of tens of thousands of workers in the event GM’s North American operations are completely shut down.

The automaker is over a barrel — GM doesn’t have a backlog of parts to work with, as its contract with Clark-Cutler-McDermott was of the just-in-time delivery variety. No other supplier makes the parts Clark-Cutler-McDermott provides GM.

The supplier, which deals mostly with GM, claims its contracts caused it to lose $12 million over the past three years. In the court filing, GM claims it loaned the supplier millions of dollars to continue production.

A U.S. Bankruptcy Court hearing scheduled for today will map out where both companies go from here. Any number of scenarios could come from the ruling, including the supplier being forced to honor its contract with the automaker. So far, there haven’t been any assembly disruptions related to the issue.

Get the latest TTAC e-Newsletter!

Recommended

143 Comments on “GM Faces ‘Catastrophic’ Assembly Disruption After Parts Supplier Goes Bankrupt...”


  • avatar
    soberD

    Failures at so many levels on both sides.

  • avatar

    Maybe you should develop more parts in-house…in America…employing Americans…

    Yes this one was Massachusetts based, but I wanna see MORE based here?

    • 0 avatar
      brenschluss

      If Massachusetts isn’t in America, then neither is New York.

      • 0 avatar
        RetroGrouch

        If you can’t murder a cyclist with your brodozer, drive your small genitalia overcompensation machine at 90mph in a school zone while leaving a parking lot meet, or shoot your AR-15 into the air to celebrate the local high school football team win, it isn’t real ‘murica.

        • 0 avatar
          stuki

          You can run over cyclists with brodozers anywhere in the world. What used to make America special, was the cyclist’s constitutionally guaranteed ability to shoot back. With proper brodozer penetrating munitions.

          • 0 avatar
            CoreyDL

            I saw a funny meme the other day.

            http://www.someecards.com/sympathy-cards/life-riding-bicycle-constantly-getting-in-way-more-successful-people

          • 0 avatar
            Testacles Megalos

            And let’s not forget the army of trial attorneys ready to step in at a moments notice to render justice for the injured – – – only in Murka.

        • 0 avatar
          SSJeep

          Lame response… to a lame initial statement…

    • 0 avatar
      DukeGanote

      That would violate the “lean and mean” principle of management. What ever happened to CYA: Cover Your Assembly line…??

    • 0 avatar

      But this was a pretty sweet deal for GM – they were getting parts cheaper than the cost to make them. Can’t get that in-house.

    • 0 avatar
      maxxcool7421

      So the costs can be higher because large numbers of union jobs pay too much and it is cheaper to ship said parts in a container … across the entire ocean.. then by rail… then by truck to the factory after being made ?

      The fact that GM was sinking money into the factory.. But not BUYING it means GM knows their business model was untenable. aka sick aka it needed to die because it cannot compete.

      • 0 avatar
        VoGo

        There’s no mention on the CCM website that they are a union shop. Do you know something we don’t?

        • 0 avatar
          MrGreenMan

          These guys say Massachusetts, if that’s where they do the manufacturing, is a closed shop state:

          http://www.nrtw.org/rtws.htm

          • 0 avatar
            JimZ

            that doesn’t mean what you think it does. all a “closed shop” state means is that if (IF) a company’s employees have union representation, then union membership is mandatory if you wish to work there (no opt-out.)

  • avatar
    28-Cars-Later

    I’ll pop some popcorn.

  • avatar

    It’s GM. It’s not like they can’t just ring the Whitehouse and remind them how critical the UAW voting bloc is in an election year with a Republican candidate trying to grab the same base. Keeping that voting bloc loyal is one of the reasons the automotive bailout passed the first time. Worst case scenario is the gummit pulls strings to have GM assume ownership of the vendor, or the gummit will maintain the vendor in perpetuity as a “key supplier of a company critical to the American economy”.

    Let me go ahead and state a disclaimer for those about to jump down my throat: I hate deficit spending, I didn’t like any of the wars and consider them terribly wasteful, and we spend too much on defense. So some of you out there can’t put words in my mouth or accuse me of being inconsistent :-/

    • 0 avatar
      JimZ

      ” how critical the UAW voting bloc is in an election year”

      if you think UAW-represented workers vote as a bloc you are sorely, sorely mistaken.

      • 0 avatar

        Then apparently so is the NYT.

        http://www.nytimes.com/2012/02/25/us/politics/uaw-tries-to-help-obama-win-working-class-voters.html

        Here’s another one for you:

        http://www.mlive.com/auto/index.ssf/2012/11/obama_to_king_re-election_woul.html

        By the way: A pox on both partys’ houses.

        • 0 avatar
          JimZ

          I’m sorry, I didn’t realize UAW members are 400,000 clones of Bob King.

          hint: the leadership of an organization supporting something is not evidence that the rank-and-file marches in lock step. The sooner you stop taking such simplistic views of people (and assuming that you’re smarter than all of them,) the better.

          • 0 avatar

            Hint: Stop making drive-by posts and back up what you’re posting.

            You’re splitting hairs. Yes, I’ll grant you the average Joe breaks rank, but the current Administration heavily courted this voting base, and that’s obvious.

            The individual Joe in the rank and file might break rank, and I’m sure they do, but the group as a whole has been catered to by the Administration, and that isn’t an accident.

          • 0 avatar
            JimZ

            “Hint: Stop making drive-by posts and back up what you’re posting.”

            I work in a UAW-represented facility and actually talk to people, instead of reading something online and assuming things about them.

          • 0 avatar

            And I worked in a wholly-owned subsidiary of one of the Big Three brands for several years, with bigwigs from said Big 3 brand present, who advocated heavily for unions and who, to a man, voted for this Admnistration and who viewed the automotive bailouts as being a good call.

            “instead of reading something online and assuming things about them.”

            Then please stop assuming things about me. Thanks.

          • 0 avatar
            TrailerTrash

            Jimz

            I think that normally I would agree that the union worker votes in unison IF they were the teacher’s union and such yet other union workers like the auto and pipefitters vote as they independently feel.
            Restaurant, clothing and other such democrat supported groups do vote straight dem.
            However, this year seems to be different for the many, many unions and many other rank and file members…if my friends are any representation.
            They normally vote strongly dem…but this year seem strangely Trumpish.
            Never realized this until recently.
            Oh, I heard them talking this way months ago when Trump was just beginning and there were what, 20 or more running in the primaries?
            I thought it was sorta weird and a little funny.
            Until suddenly they are still at it and rather emotionally violently Trump.

            I told my wife that this seems like a very strange year with so many former pro dem party voters suddenly voicing Trump praises.

            Very weitd time.

          • 0 avatar
            KixStart

            It’s not a solid block in the teacher’s unions, either.

            I’ve run into plenty of local teachers who love-love-love the Republican party, in spite of what Republican Scott Walker did just across the border in Wisconsin.

            What is probably more solidly Democrat is the money; the unions probably won’t be giving much money to GOP candidates.

      • 0 avatar
        ToddAtlasF1

        But the crime bosses make political contributions as a monolith.

    • 0 avatar
      raph

      Actually… defense spending isn’t all that bad. Its all those old people drawing off the gub-a-mint taking the biggest piece of the pie.

      • 0 avatar
        TrailerTrash

        wait…are the old farts really taking more than the welfare suckers?
        Do the oldy and moldy really use all those food stands and school tax monies?
        Are they really using the roads as much as they are contributing in taxes?

        If so…we should kill em all. They are now no more useful to this younger world.

        By they way…did you know that one of the most violent periods in American history was the youth run and youth dominated love generation?

        Do you know anything about the real data of crime?
        Or perhaps anything about productivity data?
        Perhaps not.

        • 0 avatar
          Chopsui

          “are the old farts really taking more than the welfare suckers?”

          Yes. And it’s not even close.

          • 0 avatar
            highdesertcat

            There is a difference. The vast majority of the old farts paid into the gubmint kitty. Like Life insurance, they expect a pay-out.

            The welfare suckers haven’t paid diddly schit into anything, nor done an honest day’s work.

            All the freeloading welfare suckers do, have done, and will continue to do in the future, is live off the gubmint handouts paid for by the taxpayers of America.

            Welfare! Great job, if you can get it. And you can get it, if you try.

          • 0 avatar
            KixStart

            But the old farts have generally been living longer than originally forecast. Very inconsiderate of them.

          • 0 avatar
            highdesertcat

            Kix, very true. And it is only going to get worse because those with good healthcare insurance, like BC/BS etc, or those in the FEHBP, will get ever-better healthcare over time.

            It’s all about what the old fogeys can afford.

          • 0 avatar
            KixStart

            HDC,

            Two thoughts…

            If you look at the demographics, we’re heading towards a point where only 2 workers will be supporting each retiree. That’s not sustainable and not just financially, there’s work to be done to support each retiree. We need to raise (edited) the retirement age, pronto. Should have done so years ago. And, if they’re going to do it to me (which I support), I wish they’d get on with it now, so that I can plan for it.

            There are actually two populations of elderly… The relatively rich and the relatively poor. They have different lifespans. Given that the richer ones are being taxed on their SS, this probably helps smooth out the financial problems but it doesn’t eliminate them.

            Bonus third thought… Never mind the power of the unions (which are in decline). The gray panthers vote. Getting some SS rationalization is going to be hard. Well, OK, it’s easy, but it requires more courage than the average Congressman has.

          • 0 avatar
            highdesertcat

            Kix, excellent analysis of what has been known for a very long time.

            In fact, I when I was going for my bachelors and later my MBA waaaaaay back when Christ was a Corporal, we had discussion centering on those topics in several of my classes.

            And it is also very true that the rich elderly who can afford the $1000/month health plan and don’t need their monthly SS stipend, live a far longer life than those on Medicare, Medicaid, TriCare, IHS or PHS.

            With any luck, most of the young people of today will eventually get to that stage of their lives, and then we’ll see what they demand, and what they expect from the government they formed and shaped with their votes.

            I won’t be around to see it, but it will happen!

            The answer, of course, is ever-more taxpayers, in the form of LEGAL immigrants.

    • 0 avatar
      HotPotato

      What evidence do you have that the supplier was UAW-represented and/or paid standard union-scale automaker wages? Because if they did, I don’t see why GM would take the risk of outsourcing. The whole point of outsourcing is to tap low-wage labor.

      • 0 avatar
        VoGo

        Right, HotPotato

        Also: what does this have to do with the executive branch of the government? GM, a (now) private company has a supplier dispute. They should go fix that.

    • 0 avatar
      Testacles Megalos

      Detroit as a success story.

  • avatar
    28-Cars-Later

    Ok seriously here is a better article from WSJ as GM is apparently doing what I was going to suggest:

    By STEPHANIE GLEASON
    July 11, 2016 6:31 p.m. ET
    35 COMMENTS

    General Motors Co. is fighting to get equipment and inventory from a family-owned auto parts supplier that filed for chapter 11 bankruptcy protection last week, saying a contract dispute threatens to shut down 19 GM assembly plants in North American and lead to “tens of millions of dollars in losses.”

    Clark-Cutler-McDermott Co., a 115-year-old interiors supplier based in Massachusetts, filed bankruptcy Thursday and blamed the move on an unprofitable contract with GM that has drained it of $30,000 a day since 2013. In responses filed Friday, GM accused the supplier of using the bankruptcy process and its position as a critical parts supplier to protect personal interests rather than honor contracts.

    “GM will be required to shut down all of its North American plants and suffer immense, immediate economic damages in the tens of millions of dollars,” GM lawyers said. “GM will also suffer immeasurable and irreparable injury to its goodwill and reputation, in addition to the significant disruption of the North American supply chain.”

    CCM makes interior trim components and insulation.

    GM, like other auto makers, often have a contractual right to purchase back certain tools or inventory used in production of parts for the cars it builds. Bankruptcy, however, can block a car company’s effort to obtain those assets.

    Bankruptcies in the automotive sector have been relatively rare since the industry’s financial crisis late last decade, which led to chapter 11 filings by GM, Chrysler LLC and a long list of auto suppliers. As low gasoline prices, an improving economy and pent-up automobile demand lift U.S. light-vehicle volumes to record levels, many of the larger top-tier suppliers and specialty-parts makers are booking big profits that mirror the black ink reported by Detroit’s Big 3.

    The 2009 restructuring of the auto industry was expected to be beneficial for the smaller suppliers that remained. A mass consolidation of many of the sectors in the supply base—including the interiors business CCM competes in—was supposed to lead to a smaller but healthier group of parts makers.

    CCM, which makes 175 parts for GM, didn’t diversify its business and relies on the Detroit auto giant for more than 80% of its revenue. Although it is the single source of certain interior components, CCM, like other small auto suppliers, struggles to keep up with or profit from the breakneck production pace that GM and others are setting because operating above their production capacity actually costs the company more money.

    Because GM whittled down its supply base in and before bankruptcy, it has fewer options to build critical components. Under pressure to cut further costs, the auto maker, which has less leverage to move business to competitors is struggling to pass price cuts along to its suppliers.

    The U.S. Bankruptcy Court in Worcester, Mass., on Wednesday will consider GM’s request to get the equipment and inventory it needs from CCM. A GM spokesman said the dispute with CCM won’t materially affect production before that hearing.

    GM’s relationship with Clark-Cutler-McDermott hasn’t always been rocky. The interiors supplier has been named General Motors’ “Supplier of the Year” four times in the last seven years, but CCM says its relationship with GM has soured as it absorbed losses of $12 million since 2013.

    CCM is hoping to use bankruptcy to cut ties with GM and sell its business, but GM, in court papers, claims it has the right to certain parts of CCM’s business.

    GM’s lawyers say CCM has “no intention” on continuing production of its parts.

    A lawyer for CCM declined to comment, but in court documents the company has said that it has been left with no choice but to halt its “money-losing operations” and to begin a sale process, without GM, to maximize the value of its assets.

    CCM said before its bankruptcy it had been negotiating with General Motors to address its money-losing contract issue, which it says resulted from an expansion of its facilities to be closer to GM manufacturing operations. The companies reached a temporary agreement in April under which GM propped up CCM as the auto giant analyzed whether it could or should pay more under the contract.

    On June 16, CCM shut down its plants in Franklin, Mass., and Layfayette, Ga., and laid off all its workers there. The next day GM sued and won an emergency restraining order, forcing the company to keep its factories open. The company also has a joint venture facility with GM in Irapuato, Mexico that wasn’t shut down.

    The auto maker says that on July 6 it moved to exercise its contractual option to purchase equipment, machinery and inventory from CCM plants. GM says CCM’s management has “run the debtors’ businesses into financial distress” and is now trying to protect their personal assets while ignoring “their fiduciary duties to creditors.” GM is asking the bankruptcy court for special permission to allow it to proceed with its purchase.

    http://www.wsj.com/articles/general-motors-seeking-to-get-equipment-from-supplier-in-bankruptcy-case-1468276312

    • 0 avatar
      olddavid

      I have an idea – why not have a captive supply chain, like Delco-Remy or Muncie? What a concept.

      • 0 avatar
        28-Cars-Later

        This might come to pass based on GM’s attempts to purchase the firm’s tooling. They then could start their own parts division without the debt (and presumably employees) of CCM.

        • 0 avatar
          DukeGanote

          That’s probably the strategy… Drive them to bankruptcy, then buy them cheap, fobbing the debt on someone else in court.

        • 0 avatar
          MrGreenMan

          You are correct that an asset purchase of CCM – everything but the name and the liabilities to its employees – would be GM’s smartest move at this point. Stop trying to get the federal courts to force them to stay in business and just buy up the means of production, transfer over the employees that matter, leave the other liabilities. It worked to shed Old GM.

      • 0 avatar
        stuki

        It ends up with you being held captive to a chain consisting of less than optimal suppliers. You want as few as possible competitors selling whatever you are selling, but as many as possible competitors selling whatever you are buying.

        Of course, once you find some mooch willing to sell at prices so low they lose 30K a day, chances are most other competitors will relatively quickly pack up and walk off the field.

        And then you end up in a proverbial “things that seem too good to be true….” situation.

    • 0 avatar
      CoreyDL

      “The companies reached a temporary agreement in April under which GM propped up CCM as the auto giant analyzed whether it could or should pay more under the contract.”

      Sounds like GM was doing bare minimum to “assist” in the fact that the supplier company was losing money, while the company didn’t push hard enough for renegotiation.

    • 0 avatar
      RS

      Single source with the lowest cost supplier – and make it just in time.
      Brilliant!
      …when it works…

      • 0 avatar
        stuki

        I don’t want to pile in on Obama and bailouts, but this almost does smell of management who are more concerned about showing they have gone through the formalities of “obtaining the lowest bid,” than of someone looking out for their own future financial well being. Pretty reckless, IOW. At least for anyone not confident they have a backstop, should things turn sour.

    • 0 avatar
      APaGttH

      CCM signed a bad contract and that is GMs fault? The B&B is weird. CCM could have said, “no deal,” and as the singular provider certainly appeared to be in the position of power. The contract was signed in 2013, well after GMs recovery was certain.

      • 0 avatar
        28-Cars-Later

        More than likely CCM is simply poorly managed due to its reliance on GM for 80% of revenue and 2) its lack of pricing slack in its unit costs due to the contract it previously signed with GM. CCM may have been profitable before increased demand made it unprofitable but I imagine this is something effective management should have addressed.

        • 0 avatar
          Pch101

          Parts suppliers have no negotiation power against an oligopolist that is highly motivated to squeeze them.

          It’s a terrible business for them to be in. But once they’re committed to the domestics, there isn’t much that they can do except to take the abuse. The alternative is to punt, and that’s exactly what has happened here.

    • 0 avatar
      THE_F0nz

      When I worked as a supplier, these types of contracts were common. You made money on one new vehicle, but X% cost reductions were required each year.

      If GM doesn’t re-tool certain components for the new truck (say the jump from GMT800 to GMT900), the cost reductions would continue to be a requirement. Now run vehicles for several years, and see where this leads.

      We had to work for years to get into Honda. First establish credibility with a low volume vehicle (say, the Odyssey) then pray you could work your way into an Accord or Civic. They wanted to see your books and make sure you were healthy enough for the long hall. Long term benefits on both sides were considered.

      The only reason we didn’t go under while we were primarily a GM-focused facility was that our competitor went out of business first and we got their business/talent. It was a rough time for a ton of people in 2007/2008. It left the industry altogether.

    • 0 avatar
      Whittaker

      “(GM says CCM’s management has “run the debtors’ businesses into financial distress” and is now trying to protect their personal assets while ignoring “their fiduciary duties to creditors.)”

      Pot meets kettle.

      • 0 avatar
        SSJeep

        Everyone would be absolutely surprised by the number of companies that agree to money-losing contracts. In the short term, it bolsters revenue and by extension credit availability, but in the long term it is a death knell.

        GM will likely have to buy this suppliers assets and badge the employees as GM in order to maintain operations. A drop in the bucket for GM, but a stark reminder of the issues when a contract is not at least somewhat profitable.

  • avatar
    2manycars

    Lean production with “just-in-time” delivery, so no in-house stock of critical parts, and no secondary supplier for those parts… What could possibly go wrong?

    • 0 avatar
      28-Cars-Later

      Dell was run this way for many years although I imagine computer manufacturing uses fewer total parts than assembling a Silverado.

    • 0 avatar
      John

      Your local hospital is probably run the same way. Hospitals used to stock a month’s worth or more of critical supplies – no more. Something to think about if you live anywhere a disaster could happen. Of course, if that does happen, the federal government will rush to your aid – just like they did New Orleans with Katrina.

  • avatar

    my 2017 Lacrosse has a TPW of 7/11, hope it gets built before any interruption! I ordered it before pricing was announced, imagining a mid $30 something MSRP. found out it’s almost $45. still excited. no rebate, voucher, coupon, bonus tag, 0%, instant value certificate, loyalty, conquest, or incremental allowance. just a brand new Buick for Buickman.

  • avatar
    Kyree S. Williams

    Sounds like a failure all around.

  • avatar
    S2k Chris

    Identifying and correcting/having a plan to mitigate single points of failure is a fundamental management role. How the F can the ball be dropped like this?

    • 0 avatar
      Adam Tonge (bball40dtw)

      There are only so many suppliers these days. In 2012, an explosion at a supplier slowed things down for everyone. The German plant made a component that was used in over 25% of all vehicles built across the globe. It’s a precarious balance.

      • 0 avatar
        28-Cars-Later

        I seem to recall the 2011 Japanese tsunami and subsequent nuclear meltdown putting a crimp in certain paint colors coming out of Japan.

        • 0 avatar
          Adam Tonge (bball40dtw)

          I think certain black/dark paint colors were disrupted for a lot of companies because of the tsunami.

          • 0 avatar
            Adam Tonge (bball40dtw)

            It was blacks and metallics.

            http://www.wsj.com/articles/SB10001424052748703696704576222990521120106

          • 0 avatar
            28-Cars-Later

            Good memory. A supply chain is only strong as its weakest link.

          • 0 avatar
            redav

            Ford, however, had other colors they could fall back on to displace the disruption. They had a plain black instead of tuxedo black, etc.

            If every GM plant does shut down because they have no alternative part(s) nor manufacturers, then it’s hard to really compare the two.

          • 0 avatar
            Adam Tonge (bball40dtw)

            My original example was a component that is used in plastic fuel lines on over 25% of the world’s cars. While there are other sources, something like that could have a significant impact on vehicle production.

            This is worse because the supplier is 100% reliant of GM and GM is 100% reliant on the supplier.

          • 0 avatar
            tresmonos

            Xirallic paint flake. Those inustrious Jap bastards got their plant going again within 4 weeks. It was incredible.

        • 0 avatar
          raph

          Yes, Ford seemed like they really got hit with this which makes certain Mustangs (2011+) with a color called “Lava Red” pretty rare to name a single instance.

          • 0 avatar
            Adam Tonge (bball40dtw)

            F-150s in Tuxedo black and the various red colors (there were three of them), were reduced in numbers as well.

    • 0 avatar
      Kyree S. Williams

      But how many other suppliers was GM going to find who would agree to make the parts for less than what they cost to produce?

      Of course, for GM, having to pay more for the parts is preferable to having forcibly-downed production lines.

      • 0 avatar
        Truckducken

        So true. Purchasing shoulda thought of that in advance. Nice job, MBAs. Go read a Toyota case study or two while you’re sitting around waiting for the court situation to play out.

      • 0 avatar
        Pch101

        Supplier bashing is good for short-term margins, bad for long-term quality and stability.

        Toyota and Honda do better jobs with this. Pay a bit more, but get more stability and support from your supplier in exchange for the additional expense. The supplier becomes a part of the development team and isn’t just an order taker who is subject to varying degrees of abuse.

  • avatar
    JimZ

    sounds like the supplier “bought” the business by underbidding with the hopes of getting price increases later. Doesn’t usually work.

    • 0 avatar
      28-Cars-Later

      The supplier also didn’t diversify its client base.

      “CCM, which makes 175 parts for GM, didn’t diversify its business and relies on the Detroit auto giant for more than 80% of its revenue. Although it is the single source of certain interior components, CCM, like other small auto suppliers, struggles to keep up with or profit from the breakneck production pace that GM and others are setting because operating above their production capacity actually costs the company more money.”

    • 0 avatar
      bunkie

      If you read the WSJ article closely, it states that costs increased quite a bit as demand for parts exceeded normal capacity. That tells me that unit pricing was fixed and based upon a projected demand. Given the history of GM sales volatility (on the downside) and the cost of investing in additional production capacity, it’s not hard to see how this contractual error/oversight was made.

      However, and this is the crux of the matter, did GM force an unfavorable contract on the firm. Anyone who has run a small business with only one or two customers knows that there is a strong tendency for these customers to play hardball. The response by the supplier to shield the production equipment via bankruptcy court is, probably, the only leverage they have, most likely to force a sale to GM at a favorable price.

      • 0 avatar
        28-Cars-Later

        I did notice and found it interesting. I also imagine overtime was a factor in losing money as unit prices were more than likely calculated based on standard wages.

      • 0 avatar

        Yeah I have to imagine they had fixed tooling costs based on a certain demand running that tooling 1-2 shifts. Demand went up they then had to run the tooling more shifts as they didn’t have parallel lines (or not enough of them) which caused labor and energy overruns not originally accounted for.

    • 0 avatar
      John

      Classic “We’ll lose money on each sale, but make it up on volume” business plan.

  • avatar
    shedkept

    The interiors still lag behind any manufacturer save for a Lada or a Moskvich.

  • avatar
    MarkZ06

    Almost makes you nostalgic for the old Inland-Fisher-Guide 90% in-house content days.

    • 0 avatar
      PrincipalDan

      Or as Scoutdude pointed out in another thread a few days ago, when the little guys literally bought components from other members of the Big 3. When your AMC had a Torqueflite transmission or your IH had a Saginaw power steering unit, or…

    • 0 avatar
      JustPassinThru

      Unspoken in all of this, is the “why.”

      GM sold OFF its in-house parts manufacturing divisions, as a way around UAW contracts. Simply put, the contracts made in-house production unprofitable and precluded flexibility. Putting parts sources outside the GM umbrella variously gave them non-union unskilled labor or vastly-different union contract paygrades and costs.

      Queue up the memes about “union busting.”

      But the bottom line is, there wasn’t the MONEY for all this in auto manufacture. Pay on the line, all the way through, had gotten beyond what could be supported. Farming component manufacture out was a stopgap, but only that. And it carries this sort of risk of disruption.

  • avatar
    shedkept

    @MarkZ06; Yes.

  • avatar

    OEMs so often pressure smaller suppliers into contracts that are difficult to honor, don’t allow a cost correction when a miss has been made. Then they tack on requirements and year-by-year cost reductions, bit by bit, until a tipping point is achieved. I’m not saying that is what happened here, but… Unless GM is able to get the courts to force CCM to turn over their equipment, I think they will be asking the courts to allow CCM to quickly reorganize with a better contract in place for the supplier.

    This just-in-time delivery results in a lot of expediting and air freight, I see a lot of customers (OEM suppliers) spending more on expediting than they pay my employer to machine their parts. The level of the current approach to JIT is only working maybe 75% of the time for the sector in which I work.

    I hope for the benefit of other small suppliers like the one I work for, this is resolved soon. I first heard about this Monday, but I didn’t know which supplier and the gravity of the situation.

    • 0 avatar
      redav

      My employer is infatuated with just-in-time, and there’s good reason to be, but I’m not sure if they fully appreciate the risks inherent to it. Then, when they don’t manage those risks (often because they can’t), it comes back and burns them hard.

      • 0 avatar

        Yeah this, I’ve had bosses push us towards the just in time model but in our low volume industry the chinks in the armor show up fast and can be on both sides raw materials coming in the door late or unexpected increases in orders causing us a backlog in outgoing shipments all lead to unhappy customers. It’s great when it works but a real cluster F*** when it doesn’t.

    • 0 avatar
      redmondjp

      You are right – big manufacturers push so hard for annual cost-cutting from their suppliers that I’m surprised that this isn’t more common. This has been going on for decades, and has really accelerated in the past 20 years or so.

      A major heavy-truck manufacturer I used to work for had a similar situation occur while I worked for them. There was a family-owned interior parts supplier that had tried to work with us (even offering to sell their company to us) over several months without any results.

      One Monday morning, no parts arrived at our local assembly plant for that day’s production. Scouts were sent out, only to find the supplier’s plant closed up (for good, it turned out) with the doors locked and nobody there. Whoops!

  • avatar
    jimbob457

    Zowie!

    GM bankrupts a small supplier during a boom year. What were they thinking? GM (100%) of blame. Small supplier (0%).

  • avatar
    dividebytube

    I work for a medium-sized company – several divisions – that make auto and heavy trucking parts. GM – as a share of our revenue – has shrunk the past few years, but yes, there has always been a lot of pressure on suppliers to provide parts at cheaper and cheaper prices. Luckily we are pretty diverse and could still continue on, even if we lost business with a single OEM.

    Related: We once had a division that was half-owned by another company. This division made parts for Toyota. The parts were considered critical for their NA car manufacturing. Division ended up being sold and was brought into a big Toyota supplier fold, one which was practically run by Toyota.

  • avatar
    piffpaff

    My insights in the purchasing / supply chain side of automotive manufacturing dates 10 years back, but the combination of GM being 80% of the supplier’s business and some parts being single-sourced from that supplier should have been enormous waving red flags. There must be unknown / unreported aspects to this or GM is as bad as they ever were in terms of supplier relations and management having learnt nothing from the industry leaders (regarding how to manage the supply chain) in Japan and Germany.

  • avatar
    CoreyDL

    So GM has no contingency plan for a vital parts supplier, and has never hired anybody who’s knowledgeable about concentration risk.

    • 0 avatar
      28-Cars-Later

      Yes. Or… GM has been scheming to acquire the supplier in bankruptcy for at least the last few months.

      • 0 avatar
        CoreyDL

        Ah yes, the Nissan-Mitsubishi Method!

      • 0 avatar
        RHD

        Wouldn’t it be ironic, in a Machiavellian way, for one of GM’s competitors to buy the parts supplier, just to mess with the General? Heck, if VW were to do that, they could raise the prices on carpets and headliners enough to cover a good chunk of their Dieselgate fines.

    • 0 avatar
      redav

      Indeed, what if this had been a fire or similar that destroyed the vendor’s production capacity? Not only would GM be without necessary parts, they would have no recourse to seize the production equipment.

    • 0 avatar
      VoGo

      Great point, Corey,
      There is no excuse for GM to leave itself so exposed to such a risk. Reminds me of VW/Audi when they had the ignition coils supplier issue ~10 years ago.

  • avatar
    theonlydt

    Simple.

    GM set up a subsidiary that’s wholly owned by themselves. They pick up the tooling/company cheap as part of the bankruptcy process.

    They create an innocuous enough name and ownership structure to make sure it’s not easy to trace to GM (protect from Unions if required).

    They continue to produce for their production operations and are happy. Within a couple of years they look to sell a profitable company with a big GM contract – who wouldn’t buy? Once purchased they go to renegotiate that contract, immediately devaluing the company and putting them on the edge until such a time as they fail.

    Rinse. Repeat.

    • 0 avatar
      tresmonos

      This happens often. The piece cost is usually guaranteed for a platform with the typical ‘task’ reductions or whatever GM calls it. During a reorganization a plant’s overhead is usually a mess. So new ownership generally has a good chance at being profitable.

      It’s not as bleak as you make it sound. The problem with the situation which this article references is that nothing has happened prior to this line stoppage. It usually means that the supplier ownership was so fed up that they intentionally screwed GM or that GM’s supplier and purchasing orgs screwed up huge.

  • avatar
    tresmonos

    This is typical for GM. In my brief automotive career, I’ve heard of two suppliers doing the same. Both were my employers at one time. The fact it has got to this point means no other supplier will touch the tooling with a ten foot pole due to costs, contractual stipulations (could be environmental) or that GM procurement has finally burned all their god damned bridges to the ground.

    Fuck you, GM. You had this coming. You took down a great Magnesium caster. God knows how many other Tier 1’s you ruined.

    Congrats to the ownership of the Tier 1. This is the only way American Tier 1’s stay in business: when OEM’s realize that you can’t always count on the lowest bidder.

    • 0 avatar
      highdesertcat

      Yeah, I think not many people would shed a tear over this, GM, the supplier, or the UAW. In the end, GM will get back its equipment, hire a few more employees to do the work for them, and these new employees will become dues-paying UAW members.

      So WTF? It’ll be a win-win-lose. GM will end up winning. The UAW will end up winning. And the supplier will be allowed to die under bankrupture protection.

      • 0 avatar
        VoGo

        What do the facts of the issue have to do with the UAW?

        • 0 avatar
          tresmonos

          Nothing. It has zero to do with the UAW. HDC just hates those who can also pay for their grandkids’ college degrees.

          • 0 avatar
            highdesertcat

            tres, GM will get their machinery back and will hire the people currently making the parts. And those “new” old employees will become UAW members.

            Stay tuned.

            GM is too big too fail.

          • 0 avatar
            Adam Tonge (bball40dtw)

            HDC-

            GM isn’t going hire the people currently making the parts. They’ll send the tooling to someone else they can beat up on price and bankrupt. This won’t change UAW membership levels at all. Like tres said, it has zero to do with the UAW.

          • 0 avatar
            Pch101

            I don’t really read HDC’s comments, but I presume that they can be summed up as some combination of union bashing, environmental bashing, anecdotes about his presumably fantastic family and his insistence that his spewing of various Fox News talking points makes him some kind of insightful political independent.

            If I’m missing something, then let me know, otherwise I’ll just keep scrolling past them.

          • 0 avatar
            Scoutdude

            It is not GM’s machinery and that is the source of the problem. Their agreement apparently does give them the option of buying the machinery but once they are in bankruptcy court that complicates things.

            It reminds me of a conversation with the keeper of the Scout flame. GM’s Guide division was the supplier for many of the light lenses that IH used. Well his supply of NOS lenses was running low so he made a call to Guide to have them whip up a batch. He was informed that they scraped those dies as they hadn’t had an order in ages. His thought was that they should have asked him before they sent them to scrap, but I’m betting that the original contract had zero wording about the disposal of the tooling and even if it did that contract was with the long defunct International Harvester corp, not its successor Navistar and certainly not with Scout Light Line Distributing.

            So he found someone in China that made him a batch of lenses but of course they do not have the Guide name and markings like the originals.

          • 0 avatar
            highdesertcat

            Adam, this situation will be resolved. There is no such thing as work stoppage for GM. GM will prevail, by hook, or by crook.

            My guess is that the same people now working that machinery making the parts will be the same ones on the job, for the duration.

            It would take too long to give new people on-the-job training.

            If we look back over history, there is plenty of precedence in similar situations.

          • 0 avatar
            28-Cars-Later

            Such a thing may or may not happen but this is not some sort of GM/UAW conspiracy to increase membership.

          • 0 avatar
            Adam Tonge (bball40dtw)

            GM doesn’t want to own this supplier or they would have already. They’ve loaned them millions of dollars instead of buying the business. GM will figure out how to keep production going and get someone else to own the tooling.

          • 0 avatar
            highdesertcat

            28CL, but if it happens, those employees will become UAW members, or go hungry.

          • 0 avatar
            highdesertcat

            Adam, moving production to someplace else is going to take time.

            GM has to keep the supply-line going.

            In time, yes. GM may be able to find other suppliers, maybe even in Mexico.

          • 0 avatar
            28-Cars-Later

            @Adam

            I suspect they will end up owning it outright or have a stake in whomever does own it whether they like it or not.

            @HDC

            Depending on what happens, they may move the whole operation to Michigan and hire new or even repurpose existing employees. Given the undue influence UAW has over GM, I would imagine anyone working there would become a UAW member.

          • 0 avatar
            Adam Tonge (bball40dtw)

            I don’t know if CCM is a UAW shop or not, but they only have 213 hourly workers. That isn’t going to do anything for GM. And GM would probably have another supplier come in and run the show. This facility isn’t going to become GM run.

            GM has taken tooling from one supplier to brought it to another before. This isn’t a new thing.

          • 0 avatar
            VoGo

            No, PCH,
            You’re not missing anything. That was a comprehensive summary of that dumpster fire’s contributions.

          • 0 avatar
            highdesertcat

            28CL, that certainly is a possibility, about moving production to Michigan, but there is still that nasty issue with the cost to manufacture these parts in the US. It has been proven it cannot be done profitably.

            The US wage-scale is not competitive in relation to many other wage-scales across the planet.

            And, after all, we do live in a “global economy” now, so seeking the lowest production cost, and the lowest wage-scale, will naturally be a consideration for Ms Barra.

            I’m thinking production will eventually be moved to Mexico or Asia, for the long haul.

          • 0 avatar
            tresmonos

            Pch- your synopsis is dead on. I wish he hadn’t replied to my rant. Everyone whoever replies to my comments addresses politics. TTAC is starting to piss me off.

            HDC needs to hurry up and die so we can tax his estate and prevent his free loading parasite grand kids from becoming lackadaisical millennials. They need soul crushin debt to give them character. Do it for the grandchildren, HDC.

          • 0 avatar
            Pch101

            “That was a comprehensive summary that dumpster fire’s contributions.”

            So not much has changed over the last few years, I gather.

            I recall that he would ramble on about how Mexican plants produced more reliable vehicles than US UAW plants. I responded by provided a lengthy list of vehicles that featured all of the Mexican production with below-average reliability rankings from JD Power. As it turns out, his point had no merit.

            Not sure if that helped to shut him up, as I stopped reading his comments after that.

          • 0 avatar
            Adam Tonge (bball40dtw)

            They’ll own the tooling temporarily, but don’t expect GM to build this in house when they can have someone else do it.

    • 0 avatar
      hgrunt

      Would it be prudent for GM to bring the manufacture of those parts in-house? Seems like something this critical would be best operated in a way that minimizes risk, even if it does cost a little more.

      • 0 avatar
        Pch101

        One of the primary reasons that automakers use outside suppliers for this sort of thing is that they don’t want the parts business’ balance sheet and operations on their books. Those drag down their margins. They would rather just buy the parts, which limits their exposure to the cost being an operating expense, and leave it at that.

  • avatar
    SoCalMikester

    “family owned” for over 100 years

    quite possibly the newer generations didnt have their heart or minds into the business.

    mismanagement, embezzlement, etc… CEO wife that wants the “finer things”, CEO that loves to play the ponies, upper management kids that like that nose candy and exotic vacations.

    stuff like that happens much too often when there isnt proper oversight.

    • 0 avatar
      fuming

      Your so wrong about the CEO of the company,. This was his family owned company and no one wanted it’ to work more than him. Unlike some CEOsof companies this one always cared about each and every employee and helped them when they needed help. One should not generalize about CEOs wives and family members. Why don’t you try taking the position and see how hard you have to bust your ass to make it in the workd. Never mind assuming that family members play the ponies, it might be the farthest thing from it In this family. Same with the children!,!!! Too bad someone just doesn’t quite understand how much the newer generation worked to carry the company as far as it did. Think before you GENERALiZE!!!,

  • avatar
    maserchist

    GM is just going to have to drink the water. Make sure somebody at GM , responsibly prevents the faucet getting turned off. Either GM or CCM knew a deal/deals wasn’t/weren’t going to fly. Any deal needs 2 or more; large dollops of integrity. Someone will crash and burn. It won’t be GM.

    • 0 avatar
      highdesertcat

      It’ll be the US taxpayers. Again.

      • 0 avatar
        VoGo

        Typical response. Oh the taxpayers will have to intervene! Look, it’s all the UAW’s fault! Because…Obama! The fault of those socialists in Congress!

        Get a grip. Simple supplier dispute, just a bit escalated through the courts. Moving on.

        • 0 avatar
          Whittaker

          Its not a simple supplier dispute.
          Its a bankruptcy.
          But CCM won’t be getting the sweet deal GM got in 2009.
          All companies are equal but some are more equal than others.

  • avatar
    zip94513

    Next time keep it in-house instead of jobbing everything to the lowest bidder. You reap what you sow.

  • avatar
    DownUnder2014

    Hmmm…quite an interesting read with both the article and the comments.

Read all comments

Recent Comments

  • raph: Whooo… 91k for the topped out Black Label ( only two options available though – towing package and...
  • Lie2me: EB, as always telling us what to think and what to do. He’ll set us straight :(
  • FreedMike: And the XT6 looks even more like an XC90. I bag on the XT6 a lot, primarily because it’s...
  • Kyree S. Williams: If anything, the Telluride looks more like an XC90, shape-wise.
  • Kyree S. Williams: Having sampled both, this most definitely *isn’t* nicer than the newest (G05; 2019+) X5....

New Car Research

Get a Free Dealer Quote

Who We Are

  • Matthew Guy
  • Timothy Cain
  • Adam Tonge
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber