It was the kind of train wreck that keeps purchasing managers awake at night.
In 2002 General Motors was struggling to get the wiring harnesses it needed from Exemplar Manufacturing Co. to launch the Saturn Ion. Ford Motor Co. feared that a short-term shortage of raw material could prevent Exemplar from making wiring harnesses for the Mustang.
But GM feared a political backlash if it used its existing right-of-access agreement and seized an Exemplar plant from its minority owner, Anthony Snoddy.
"It was a last resort, and it was ugly," a GM source says. GM feared that the seizure of a minority-owned supplier would prompt Detroit newspapers to splash the story across front pages.
Supplier takeovers are risky. They rarely occur -- and the Exemplar case illustrates why.
Takeovers "are generally more expensive than they think," says consultant Tim Weed, because automakers "underestimate the disruption to the supplier, and the process creates uncertainty for employees."
In one case, the involvement of two automakers at a troubled supplier led to disputes over which would handle the costs of operating the plant, says Weed, of Plante & Moran PLLC in Southfield, Mich. Weed declined to identify the supplier, but he could have been describing Exemplar.
At its height, Snoddy's Ypsilanti, Mich., company employed 2,200 people and posted sales of $168.9 million in 2001. Snoddy was a former GM employee and a 1997 GM supplier of the year.
The automakers provided financial help in return for a right-of-access agreement and were prepared to execute the contract, according to people familiar with the case.
But GM and other automakers also have maintained high-visibility efforts for several years to increase contracting with companies owned by women and minority members. A seizure could have sent the wrong public message about those efforts.
So GM sought help from minority suppliers Dave Bing, Ronald Hall and Bill Picard. "I told them I cannot get parts and asked their advice," the GM source says.
Hall, CEO of Bridgewater Interiors LLC in Detroit, says the group understood GM's plight.
Their message to GM: "Do everything you can to keep Exemplar open. But if it comes to the point that you have to pull the job in order to keep shipments of parts on time, we would support GM."
GM declined to seize the plant but quickly transferred the business to another supplier.
Ford exercised its right of access. The automaker took control of certain plants within the Exemplar complex, says Ford spokesman Paul Wood. The automaker's restructuring and turnaround team spent about a year correcting the problems.
Exemplar filed for Chapter 11 reorganization in January 2003. At the time, Snoddy told Black Enterprise magazine: "There is no future for Exemplar Manufacturing Co. All assets have been liquidated."
Neither Snoddy nor company lawyer Joe Fischer returned telephone calls.
You may e-mail Robert Sherefkin at [email protected]