DETROIT - General Motors plans to end a bold experiment in supply chain management with the buyout of a 6-year-old joint venture.
GM is in the final stages of its buyout of Vector SCM LLC, the joint venture created in December 2000 to provide logistics for GM's global supply chain. GM is buying the 85 percent stake in the venture held by trucking and logistics giant Con-way Inc.
Vector has been responsible for the design of GM's global logistics network, including new-vehicle delivery and shipments of original-equipment parts, aftermarket parts and materials.
The GM buyout signals still another reversal of the longtime industry strategy of outsourcing parts and services. Last year GM announced that it had given up on outsourcing complete interiors, moving many of its vehicle interiors programs in-house. Now GM has deemed logistics a core competency.
GM will assume full control and ownership when the Vector buyout is completed, possibly in September. Investment bankers for both are still determining a sale price, but Baird Equity Research put GM's buyout cost at $50 million.
The GM experiment was unique, Thomas McMillen, GM's director of global logistics, global purchasing and supply chain, told Automotive News last week.
"To my knowledge there was nothing like this," he says. "Every day companies work with lead logistics providers, but to my knowledge there was nothing of this magnitude" for a joint venture on a global basis.
But a GM source questioned the mutual benefits of the venture: "It was not clear if the performance of both companies was where it should have been in order to proceed with this partnership."
Even though Con-way controlled 85 percent of the joint venture, both Con-way and GM had equal board representation, according to the automaker. Con-way, of San Mateo, Calif., and GM shared the savings Vector realized from GM's $6.60 billion annual logistics business.
In 2005, Vector, of Novi, Mich. reported $20.3 million in operating income, its share of the supply chain savings it produced for GM, according to the trade publication Traffic World.
In a statement, Con-way CEO Douglas Stotlar said that over the term of its investment in Vector the venture returned significant profits for Con-way and Menlo Worldwide LLC, Con-way's global contract logistics subsidiary.
Con-way posted sales last year of $4.17 billion from the fleet of 32,000 trucks, tractors, and trailers it operates in North America.
Stotlar said the venture was a success and shows how a lead logistics provider can drive out costs and create a competitive advantage.
You may e-mail Robert Sherefkin at [email protected]