New role for GM: Mr. Nice Guy

Bo Andersson
Title: Executive in charge, worldwide purchasing, General Motors
Age: 45
Education: Bachelor’s degree in business administration, Stockholm University; senior management program, Harvard University
Career: Joined Saab in 1997; named vice president of purchasing in 1990; moved to GM in 1993 as executive director electrical for worldwide purchasing group; named vice president, GM Europe worldwide purchasing in 1997; named to current position in 1999

Surprisingly, General Motors has become the auto industry’s nice guy on supplier relations. A decade ago, rough cost-cutting measures at GM soured supplier relations and inaugurated a lingering boycott by parts makers that declined to share their newest technologies with GM.

Bo Andersson, executive in charge of GM’s worldwide purchasing, is out to change all that.

Armed with a new Web-based supplier monitoring system, Andersson is able to keep parts makers up to date on their performance on a factory-by-factory basis.

Suppliers are ranked . Andersson’s team has established executive champions to help suppliers deal with the industry’s biggest customer. And GM again is attempting to encourage suppliers to share new technologies and cost-saving ideas with the automaker, even offering to split with them the savings that come out of the effort.

Automotive News spoke with Andersson at his office in the GM Technical Center in Warren, Mich.

At a conference this year, you were hailed as the guy who was kind to suppliers. How do you like being the popular guy among the Big 3 purchasing chiefs?

We have been trying, both Harold Kutner and I, to raise our expectations, to be clearer and more consistent in our execution. But we have a big ship. It’s hard to change the behavior of our purchasing people. It takes time. But I think that suppliers are clearer about what we expect, and that if they fulfill our expectations they are being rewarded.

For the past two years I’ve tried to have three focuses: a focus on quality, development and launch, and current business. If a good supplier has the business today, we would like him to keep the business. That’s one of the changes we have made.

What kind of advantage will somebody who has worked well with you on a program have going into the next program?

We still have competitive bidding in one way or another. But in the bid process we use on a worldwide basis, if you are currently “green” on quality, you’re green on quality on that new bid list. If you’re “green” on technology, you’re green on the new bid list. If you’re “green” on warranty, you’re green on the bid list. If you’re “red,” you don’t get any business.

We’ve more or less empowered our organization to say that we cannot go forward with a supplier who is not performing.

Another thing we’ve been trying to do on some of our replacement programs is that if the current supplier is performing very well, he has the next program as well.

Without bidding, how do you price it?

First of all, it assumes the supplier is competitive today, and it assumes they will have competitive price reductions going forward. One recent case involved a rather big component with very big investments. We determined what the end price should be and it was 80 percent of the current price.

So you make a target price. The supplier meets the target price. You already know they’re good, and they get the business.

And if we know the reductions are going to be 3 percent a year, we know what the price will be after four years. So we can say, “Based on today’s price, the new part going into production will be 80 percent of today’s price. Since you have today’s vehicle, you’re near it. Here’s what you need to do. We know quality is not an issue.”

That’s how we try to run it. But some of the suppliers have said it’s tough to meet competitive benchmarks for the next four years. I say if you can’t do it, why should we give you the next generation?

So it’s not like kissing and hugging. This is a business. We take the best performing suppliers and say, ‘You have it.’ And we help them by not going out quoting their business. But on the other hand we say, ‘You need to perform.’

What is GM doing to help suppliers go from red to green?

The quick answer is we have provided them a tool that they should use as much as they can. As always, there are roadblocks on our side that we need to take away, whether it’s in the specifications or engineering or subsuppliers or whatever.

When we started this, we were very clearly focused on quality. The task for us was to give targets to the suppliers. Instead of what we typically did in the past, we established the targets with the suppliers. We said to them, ‘You establish the targets that you think you can meet.’ They make their commitments month by month.

Another important issue is that we are trying to be consistent. In the past, we had 500 quality engineers who might visit a supplier, and each one might have his own view of things. Now I think we are much more disciplined. There is one executive champion. He’ll typically have two people working for him. They say the same thing and measure the same results.

Do you care who owns the supplier? Do you care whether it’s a professional investor or an operator?

It’s a very important question. But I’ll say to you, the central question is what is the stated purpose and what is their aim. For some of the guys who are viewed as financial owners, their performance is not bad. There are good examples of these guys doing well — like David Stockman (head of the Heartland Industrial Partners acquisition group). But I am concerned that we will have more and more investment companies. And I’m not sure we will have the same purposes. When somebody invests a billion dollars to make their facilities more productive and make our product better, I love that. I’m not sure all financial institutions are working that way to invest that type of money. When you invest that type of money in our products, you must have a long-term focus. It’s very shortsighted to just sell it again to erase a debt.

Are financially troubled suppliers a more common problem then they were?

We have 10 percent of our suppliers who are rated financially low. Is it a huge issue? No. Is it an issue? Yes. We are trying to support these guys that we really want aboard. And we are trying to get out of the ones we don’t.

Do you support those suppliers who are in a financially troubled situation? Are you supporting them financially?

(We support) suppliers that are playing a critical role to us. Sometimes I think we cannot continue to do that. It still comes back to the reason why they are in trouble. If it’s sustainability, that can be hard to fix. If something bad happened to them, we are fixing that. Do you ever give a supplier better pricing, rather than a loan, because they are in trouble? You say, for example, I know we agreed this was going to be $4, but instead we’ll give you $4.40?

Sure. It’s case by case, but we try to analyze it and say what’s the problem? If pricing is an issue, then we can address that. If the financial structure is an issue, we help them with that. Maybe we have 50 to 60 suppliers we work with and give support to on a regular basis.

We recently reported that you did $96 billion in business over Covisint. How much is Covisint affecting your operation? How much are you using it?

Auctions are not a big thing for us. In the past, we’ve typically been doing stampings and those kind of products. We can do more and more parts. Covisint has improved its quote management model over the last couple of months. The key question for us to ask now is where do the real benefits come in? When you look at increased Tier 2 and 3 involvement, when you look at supply base collaboration, at the ability to set things up in new ways, this is where the big benefits are. They are building up more competencies, and as they build up more competence we’ll use them more and more

What’s Harold Kutner’s association to purchasing these days, and what’s your relationship to Harold?

Harold is formally my boss. Secondly, he is my mentor. He is not shy about telling me whether I’m doing good things or doing bad things. He’s my coach, and I think he’s given me a lot of room to do the things that I believe are important. We have developed these concepts together.

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