General Motors expects to boost its internal goal for minority supplier spending to 6 percent next year.
The automaker is confident it will meet this year's target of 5.5 percent, or almost $2.5 billion, from Tier 1 suppliers.
The target of 5.5 percent in 2000 was an increase from GM's 1998 goal of 5.0 percent, or about $2.2 billion.
The automaker says purchases from Tier 2 minority suppliers via the Tier 1s will add another $1.4 billion, bringing its total amount to close to $4 billion for this year. In awarding contracts, GM asks that Tier 1s spend the additional funds with Tier 2 minority suppliers.
GM's efforts are in line with other automakers and Tier 1 suppliers to boost spending with minority-owned suppliers. Ford Motor Co., DaimlerChrysler and Toyota Motor Manufacturing North America Inc. all have programs in place to boost spending with minority suppliers to 5 percent or more in the next few years. DaimlerChrysler hopes to double its minority supplier spending to $4 billion within the next two years. Delphi Automotive Systems Corp., the world's largest automotive supplier, expects to spend $460 million with minority suppliers this year.
Those goals are based on direct services from suppliers, which cover vehicle production, parts and modular systems, equipment and related expenses. Automakers and suppliers also are looking to spend more with minority firms on communications, paper and supplies.
GM purchasing officials expect the target for minority purchasing to be raised at least one-half percent a year in the future.
While its efforts on purchasing from minority companies date from the late 1960s, GM has given the area extra emphasis for the past four years, says J. David Allen, GM's director of supplier diversity.
'We've been very conscious, pushing it hard,' he says. 'When you hear that three out of five people in America are or will be Hispanic, that's incredible market share on a global basis.'
The value of GM's minority contracts has risen steadily. In the past 33 years, GM has spent $24 billion with minority suppliers, according to purchasing officials. For about 12 years, GM was spending about $1 billion a year on minority supplier purchases before raising the targets several years ago.
The increased spending comes at a time when GM is shrinking its supply base. GM is working with fewer than 600 Tier 1 minority suppliers, down from about 650 five years ago.
Ford says it has 320 minority suppliers out of 1,600 production suppliers. Five years ago, Ford's minority supplier count stood at 290.
GM has awarded a number of multimillion-dollar, long-term and joint venture contracts to minority suppliers in the last two years, many in Detroit's Empowerment Zone.
Major winners are a $900 million, five-year contract to seat makers Bridgewater Interiors in Detroit, a joint venture with Johnson Controls Inc.; $700 million to fuel storage system supplier VITEC in Detroit, which is aligned with Regal Plastics; and about $550 million in five years to Mexican Industries, in joint ventures with instrument panel assemblers Collins and Aikman, and Dos Manos, a plastic injection molding supplier.
GM also awarded about $1 billion over five years to Saturn Electronics and Engineering Inc. in Auburn Hills, Mich., headed by Asian-American Wally Tsuha, in a joint venture with Motorola Corp., commencing in 2002.
As part of its commitment, GM has awarded more than $2.6 billion in contracts in the last four years.
PARTNERS AS MENTORS
In its minority development efforts, GM is stressing the importance of joint ventures between Tier 1s and minority suppliers. These ventures require a minimum 51 percent control by the minority company.
'We encourage minority companies to think out of the box and match up with larger suppliers,' Allen says.
Tier 1s oversee the process through the joint-venture phase and provide mentors and training to minority companies, which can wean themselves and take on major responsibilities as Tier 1s.
William Picard, CEO of Regal Plastics and VITEC, says joint ventures provide a distinct advantage to the minority supplier that is being groomed for larger, global roles.
'The joint venture arrangement allows the minority company to be involved in even more joint ventures around the world,' he says.
In the next several years, purchasing officials say GM could readjust its minority supplier spending and be even more aggressive. One purchasing source said: 'We recognize who the customer base of the future is.'