TRAVERSE CITY, Mich. -- For General Motors' suppliers, no-bid contracts have become the norm rather than the exception, now that GM has rolled out a parts-buying program that forgoes traditional bidding.
GM purchasing chief Steve Kiefer says the program, dubbed the One Cost Model, has been used to negotiate purchasing contracts worth billions of dollars.
Only a handful of suppliers have declined to participate, Kiefer said.
"There has been some controversy about the program, but I think there is growing acceptance," Kiefer said last week in an interview here. A handful of suppliers declined to allow GM's team to visit their factories and study their books, and "we're continuing to talk to them," he said.
Under the program, GM dispatches a team of engineers and purchasing staffers to visit a supplier's factories and analyze its internal cost data. If GM and the supplier can agree to terms, the supplier can get a contract for the life of a vehicle. In return, GM does not solicit bids from other suppliers.
Each year, GM and the supplier update the cost analysis to see whether the supplier can cut costs.
On Nov. 6, GM gave suppliers an in-depth explanation of the program. Since then, Kiefer said, the automaker has used the One Cost Model in its dealings with nearly all of its Tier 1 suppliers.
As a result, participating suppliers get an early look at GM's product plans, with an opportunity to propose cost-saving ideas before GM freezes the vehicle design.
The One Cost Model helps GM 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.
But Kiefer says GM's program is gaining acceptance.