General Motors has launched a parts-buying program that forgoes conventional supplier bidding.
Instead, GM inspects suppliers' factories and analyzes their internal cost data.
Suppliers who agree to the procedure, dubbed the One Cost Model, get contracts for periods ranging up to the life of a vehicle. GM, in turn, doesn't seek bids from other vendors.
GM will update its cost analysis each year to see whether the supplier can cut costs by more efficient production.
In some cases, supplier contracts may skip annual price-downs -- price cuts that typically range from 1 to 4 percent.
The One Cost Model is important because it can bring suppliers into vehicle programs earlier, enabling them to cut costs by optimizing a part's design and production.
In turn, it enables GM to develop more realistic cost analyses for vehicle programs. But it requires a high degree of trust between GM and its suppliers, a quality in short supply in years past.
GM explained its program during a Nov. 6 meeting with suppliers. Automotive News obtained a copy of the company's PowerPoint presentation.
The program "can be used to jointly identify waste and continuous improvement opportunities," said Kim Brycz, GM's executive director of global product purchasing, in a May 4 written statement to Automotive News. GM has begun using it "with many of our suppliers as the foundation for new strategic sourcing awards."
Brycz declined to discuss specifics, but a supplier familiar with the program confirmed key details outlined in GM's PowerPoint presentation.