Late delivieries won't be penalized

The Big 3 will not attempt to recoup the costs of lost production from suppliers unable to deliver parts because of tighter security at the U.S.-Canada border after the terrorist attacks.

A General Motors spokesman said the automaker will not seek any cost recovery from suppliers who weren’t able to ship parts on time because of heightened security measures after the Sept. 11 attack.

Harold Kutner, GM’s group vice president for worldwide purchasing, praised his suppliers. “You have worked hard on GM’s behalf to keep vehicle production disruptions to a minimum during these difficult times, and I have nothing but admiration for your efforts,” Kutner wrote in a letter to suppliers. A copy of the letter was obtained from industry sources.

DaimlerChrysler spokesman Trevor Hale said, “We lost minimal production at the Windsor assembly plant, and we will be able to make it up without much impact.”

On Sept. 14 GM canceled the first shift of its Oshawa truck plant in Ontario and stopped production for a short time at its Janesville, Wis., plant because of parts shortages.

After the attack, U.S. borders with Canada and Mexico were closed, as well as all airports. That ended all cross-border parts shipments.

“The impact was swift,” said Malcolm Heath, CEO of freight handler GeoLogistics America Inc. in Santa Ana, Calif. “The shutdowns hit the entire supply chain, bringing some production to a standstill.”

Airbag supplier Autoliv Inc. not only fell behind filling full orders to its customers, but was unable to get timely internal shipments because of border and airport shutdowns. Spokesman Patrick Jarboe said Autoliv is using airfreight at customers’ request.

Parts suppliers are under intense pressure to maintain tightly scheduled parts deliveries because automakers have so thoroughly adopted just-in-time delivery to cut inventory costs. Late shipments can halt assembly lines and cost automakers lost sales. Suppliers are known to use expensive airfreight to move even low-margin items such as door panels to meet deadlines because penalties are costly.

Industry experts say it was the Tier 1 suppliers who were most at risk. They often supply their own freight systems and are responsible for meeting plant demands.

Consultant Craig Fitzgerald, a partner with the firm Plante & Moran LLP in Southfield, Mich., said many small suppliers rely on transportation contracted by an automaker. He said they could be liable if their inability to meet production schedules caused late delivery.

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