It can't possibly be good news for North American suppliers that Nissan CEO Carlos Ghosn is waiting in the wings to talk to General Motors CEO Rick Wagoner about a new global alliance.
Such a partnership can mean just one thing to GM's parts makers: Their prices could be squeezed even further.
GM's supply chain is already operating on razor-thin margins, battered by falling volumes and banged by customer pressures to fall in line with lower prices around the world. What other promise does an alliance offer than still lower operating costs for GM?
Global purchasing power
Extending the Nissan-Renault global alliance to the world's largest automaker would logically mean incorporating GM into the Renault-Nissan Purchasing Organization.
That entity has worked wonders for Nissan and Renault. Before their 1999 hookup, the partners lacked true global presence - or economies of scale - when it came to buying auto parts. The purchasing organization now handles 70 percent of their global spend.
It is a somewhat complex international arrangement, with purchasing managers on three continents taking the lead on certain commodities, but not others.
They work together on some projects, separately on others. Nissan sources cockpits; Renault does not. Nissan North America needs pickup frames; Nissan of Japan does not. Nissan now can benefit from Renault's supply chain in Europe and the Middle East. Renault can tap into Nissan's connections in Asia.
The two can develop vehicles together - such as the new Nissan Versa - for global platforms with shared world parts.
GM, on the other hand, already has it all, does it all and lacks for nothing. Last year, GM built more vehicles than Nissan and Renault combined.
In short, when it comes to parts, GM doesn't need Nissan and Renault.
GM already claims to have the best global sourcing system in the world. It scans the world for the lowest prices on commodities. It pulls material from China, Mexico, Brazil, France, Korea, Germany, Ontario, Ohio and Alabama.
Can there possibly be a supplier anywhere in the world that GM is not familiar with? Can there be a supplier somewhere that GM wishes it could do business with but just can't seem to sign up? Can there really be a supplier out there that isn't making the GM cut but will suddenly make the grade when an additional 400,000 Nissan trucks are thrown into the negotiations?
Assuming there is such an unknown supplier, which of GM's existing North American suppliers will get bumped on the next GM vehicle to make room for it?
For the record, despite its factory closings and employee buyouts in America, GM's overall global production volume rose last year by the equivalent of two auto plants. Its sales around the world rose by 514,295 vehicles - almost as much as Toyota Motor Corp.'s heralded global sales increase.
GM's problem, the world has noted, is in its home market, North America. U.S. consumers are being bedazzled away by competitors from Asia, such as Nissan, Toyota, Honda and Hyundai. Those competitors have lower overheads in North America, true.
Is it hip?
But that is not why consumers are leaving Buick to buy Toyotas. The reason has more to do with brand perceptions, fickle design issues, the newness of certain models and that most elusive of all buying considerations - the hip factor.
All of that has zero to do with the price of components made in North American parts factories.
Yet, that reality will not stir Wall Street or persuade GM's restless billionaire investor Kirk Kerkorian to back off. Instead, Kerkorian et al. see an opportunity for an alliance that will cut deeper than GM is supposedly willing to do on its own.
Sadly, industry history shows us where the cutting is most likely to begin. Any new alliance created in the public-execution atmosphere that seems to surround GM at the moment is certain to justify itself by producing quick results in the form of supplier cost reductions.
In that event, it will be GM's historical U.S. partners - the guys making the headlights and the cam covers and the rubber door trim - who will bear the pain of GM's predicament. Less certain, meanwhile, will be how an alliance will tackle GM's real problem: attracting more Americans into Buick and GMC dealerships.
You may e-mail Lindsay Chappell at [email protected]