Ask an auto parts supplier these days: If you had to pick one Big 3 automaker to do business with, which one would it be? Chances are the answer will be General Motors.
That's GM, the same company whose ear-slapping treatment of suppliers in the early 1990s gave the auto industry a new term: 'a Lopez.'
But in the midst of a tortuous year for suppliers, in which profit margins, stock prices and customer relationships have crashed, GM appears to be emerging as Mr. Nice Guy.
Or at least Mr. Somewhat Nicer Than The Other Guys.
'We're seeing some improvements at GM. The signs are very encouraging,' said Neil De Koker, managing director of the Original Equipment Suppliers Association, a Troy, Mich., trade group representing 225 parts makers with combined sales of $280 billion. Earlier this year, some of the association's members were calling for a unified action to block a DaimlerChrysler 5 percent price cut.
Tom Stallkamp, who ran Chrysler Corp.'s global purchasing operations during a halcyon period of supplier relations in the 1990s, credits GM with moving toward its own extended enterprise approach to purchasing, a term Stallkamp used at Chrysler. In that enterprise, suppliers are helped to flourish by taking a bigger voice in product development and cost.
'It is encouraging to see GM adopting some advice,' said Stallkamp, who now is CEO of engineering supplier MSX International Inc.
Stallkamp made his comments in June during an Automotive News roundtable with supplier CEOs.
Encouraging? Considering what has been happening lately in the supplier arena, companies are taking any lull in the bombing to be encouraging.
Ford Motor Co. went to war last year against one of its most loyal suppliers, Bridgestone/Firestone Inc.
To bolster its own bottom line, Ford had been telling the rest of its suppliers to cut their prices 3 percent annually. But late last year, it raised the cut to 4.5 percent a year. Now Ford also wants suppliers to go unpaid for their parts until they are installed in a vehicle. Under another plan in Europe, Ford's factory tooling suppliers wouldn't get paid until the vehicles built with them start selling.
Last year, DaimlerChrysler's financial problems prompted that automaker to begin unilaterally whacking 5 percent off the amount it owed on invoices. The automaker told its supply chain to find ways to give back an additional 10 percent in prices within 24 months, even as the suppliers coped with a hastily called reduction in North American production levels. Meanwhile, the popular Chrysler system of splitting cost savings with the supplier that delivered it has been discontinued.
What's different at GM?
According to many industry people, the answer is Bo Andersson.
Last year, as the then-44-year-old Swedish executive began to make his presence felt as executive-in-charge of GM's worldwide purchasing, suppliers sensed something was changing. Call it a reformed GM purchasing regime.
Case in point: GM's new 'Supplier Suggestion Program.' Like the Chrysler Supplier Cost Reduction Effort (SCORE) program of the 1990s, GM's program is asking parts producers to identify cost reductions, and then it splits the savings with the supplier. Under the program, which began this year, GM takes 65 percent of the savings and the parts company pockets 35 percent.
'Our program is flexible, and we share savings with you,' Andersson told a Detroit gathering of most of its supplier companies in June. 'Each supplier has a firm but individual quality, launch and savings target. It is up to you to determine how to meet your targets.'
Another case in point: a new commitment to supplier rewards. According to Andersson, suppliers who excel at meeting GM's targets on cost and quality will have priority on new GM business. Andersson says that in the first six months of this year, GM has more than doubled its future business with suppliers who have won GM Supplier of the Year awards.
Another case in point: GM SupplyPower. Launched last fall, the live, online information system allows suppliers to track GM's satisfaction with every part factory in its chain. The program was designed using recommendations from the suppliers themselves. The site is receiving more than 5 million hits a week.
'GM's in a good spot right now,' said supplier consultant Donna Parolini, a partner with Roland Berger & Partner LLC in Troy, Mich. 'The suppliers I talk to actually like the online system. Maybe GM's learning a little something.'
Memories of Lopez linger
Parolini wouldn't have uttered those words in the 1990s. She spent the first part of that decade helping distraught GM parts makers in Michigan cope with the automaker's less gentle period. Like the rest of the industry, GM was prodding suppliers to adopt quality programs and, even then, pressuring them for lower costs.
But with the 1992 appointment of J. Ignacio Lopez as GM purchasing czar GM took bad relations to a new level.
Lopez and his team demanded parts price reductions in mid-contract for many suppliers. He threatened to and in some cases did cancel orders if suppliers failed to make immediate changes. In at least one case, his actions left a supplier with a newly built assembly plant and no customer.
The memory of the Lopez era still haunts U.S. suppliers. It also haunts GM. In perhaps the ultimate payback for their treatment, many GM suppliers have for years routinely refused to favor the automaker with new technology and innovations.
For the past several years, according to industry research firm Planning Perspectives of Birmingham, Mich., suppliers instead have been offering their ideas and product advances first to GM's competitors.
'With new technology, the question is always who gets it first,' said John Henke, Planning Perspectives president. 'What you have are suppliers saying, `We're not giving GM anything.''
Henke has just completed a survey of 261 Tier 1 suppliers that bears out his claim. Henke specifically asked where the firms take their new technology. The suppliers put GM last.
This is not only something Andersson is aware of, it is something he wants to correct.
'We must have suppliers that introduce technologies that make people want to buy our vehicles,' Andersson told his Detroit audience in June. 'We will only gain efficiencies around the world by working together with our best suppliers.'
If suppliers remain wary, they are at least hopeful. GM remains the world's biggest automaker. A contract with GM traditionally has been the hallmark for business stability and prosperity.
But the gargantuan issue of cost cutting remains, and GM is no less interested in lower prices than its competitors. Late last year, Andersson told his suppliers that 3 percent cost reductions would do. But he clarified that many suppliers are already competitive and might be expected to turn in only one-half percent.
Allendale, Mich., plastics extruder Carl Brown thinks the sea change at GM may be a matter of style.
'GM is still very tough to negotiate with on price,' said Brown, COO of Nicholas Plastics Inc. 'That hasn't changed. I don't see that changing. But there are different ways to achieve what they want. I think what we're seeing there is a new approach to the way they go about it.'
Stallkamp believes GM is shrewd to look for a different path than its competitors.
'What usually happens in this industry is when one guy adopts a really one-way approach or a too-harsh approach, there is another guy who will pop up opposite to that and use that to their advantage,' Stallkamp said.
Added Stallkamp: 'I think that GM was intelligent enough to see that. It happened to them because we used GM as the foil; Lopez was the foil when we invented the Extended Enterprise at Chrysler. So you give them an 'A' for organizational learning, which sometimes doesn't happen in this industry. They've gone out and approached it intelligently.'