DETROIT - Lower oil prices and the Southeast Asian financial crisis have piqued General Motors' interest in becoming a supplier to its suppliers.
Since about 1990, the automaker, which posts $166.4 billion in annual sales, has used its enormous buying power to get better prices on steel for itself and its metal parts suppliers. In 1998, GM wants to do the same thing with rubber and plastics raw materials, according to Robert Socia, GM executive director of chemical purchasing.
By buying natural and synthetic rubber and other materials and reselling them to its rubber and plastics parts suppliers, GM will ensure lower prices on those parts without hurting suppliers' profit margins, said Louis Fierens, GM's worldwide chemical commodity manager. Fierens oversees the purchase of rubber materials and parts.
GM will assume the 'risks or rewards' when raw material prices fluctuate, insulating its suppliers further, Fierens said.
At the automaker's North American Operations headquarters in the Detroit suburb of Warren, Mich., GM's purchasing department has its strategy mapped out on the walls of its main meeting room.
The GM officials, who discussed the project recently at NAO headquarters, said the company already has agreements with some 'key' - but undisclosed - material suppliers. Fierens declined to estimate how much the resale program for rubber raw materials might save the company or automotive consumers. Figures on the steel resale program also are unavailable.
Because rubber materials are so diverse, GM's implementation of a rubber resale program will be staggered, Fierens said. Some areas will be easier than others. It may make more sense to get involved with the 'out-of-the-ground' raw materials like petroleum, he said.
GM is interested particularly in raw-material deals in Southeast Asia. Fierens has been investigating how much open capacity is available there and whether those material suppliers can meet GM's quality requirements.
The financial crisis in Southeast Asia has opened up plenty of opportunities for companies with U.S. currency. For this reason, GM is encouraging its supply base to 'come in with hard dollars and establish a manufacturing base in Southeast Asia,' Fierens said.
'We have found significant opportunities,' Socia said.
Although some suppliers have been sophisticated in handling the opportunities in Southeast Asia, others have acted like neophytes, the GM officials said.
And some suppliers do not need much help. Companies such as Goodyear produce many of their own raw materials. If GM cannot get a better deal for tire makers, it may work with those suppliers to help smaller rubber product makers, Fierens said.
In December, GM hired Mary Blair as the worldwide chemical commodity manager in charge of plastic resins. Her job has been to get the company's 2-year-old resale program for plastics back on track. GM 'walked away from (the plastics program) a bit,' Socia said.
Blair, who has made several trips to Southeast Asia, said her team already has been able to get long-term contracts - three to five years - for resins. Such contracts stabilize a molder's material costs and relationship with its raw material suppliers, she said.
'It's something we should have done a while ago,' Socia added.
GM has a head start when it comes to rubber resale. The company currently buys rubber for subsidiary Delphi Automotive Systems, which molds rubber engine mounts and extrudes rubber brake hose in the Dayton, Ohio, area.