GM's supplier-friendly initiatives bear fruit

DETROIT -- For a program as massive as General Motors' next-generation full-sized truck platform, the automaker typically would begin inking supply contracts roughly three years before the start of production.

But GM's purchasing enterprise isn't doing typical GM things these days.

On the upcoming full-sized truck program -- code-named T1XX -- and other recent vehicles, GM is introducing new practices and more rewarding contracts to encourage its suppliers to work more closely with the automaker, share creative solutions and reduce costs.

Just ask Ray Scott, head of Lear Corp.'s seating division. Scott's team began huddling with GM's product developers nearly four years ahead of production to design the seats that will go into the next-gen full-size pickups, including the Chevrolet Silverado. That was so early that the hard points of the trucks' interior weren't locked in, giving Scott's people far more influence on the design.

Lear worked with GM's designers and engineers on how best to integrate the seats into the floor. That made it easier to reduce mass. And there were sizable cost savings because Lear had time to line up its own suppliers for foam, trim covers and other components. On a typical vehicle program in the past, the schedule already would have been pre-determined by GM and locked in place.

"It basically allowed us to build a crafted seat," Scott said "You're in prior to everything being defined. So you can really influence the craftsmanship, the integration, the design and mass and cost."

The end result: better seats for the next-gen pickups at a lower cost than the seats on the current full-sized truck platform, K2XX, GM purchasing boss Steve Kiefer says.

"In the past, there would have been a lot of compromises and cost in the design because we wouldn't have been able to make changes to the interior space while we were incorporating their product."

Industry sources expect GM to launch the first vehicles off the T1XX platform, a redesigned Chevrolet Silverado and GMC Sierra, in the second half of 2018. Kiefer and Scott declined to discuss the timing.

Earlier collaboration is one of the hallmarks of GM's changing approach to its suppliers. Since GM's 2009 bankruptcy, its executives have been saying all the right things to convince skeptical suppliers that the old, beat-'em-up-on-price days are in the past. Kiefer and the two purchasing chiefs who preceded him -- Grace Lieblein and Bob Socia -- have shaped a number of programs to bolster supplier trust and make it easier to do business with GM's $90 billion-a-year purchasing empire. The new GM approach includes the chance for no-bid contracts and even the offer of contracts covering multiple generations of a vehicle program.

The effort is proving appealing to suppliers, although some say it remains a work in progress. Some say GM's pricing pressure is as fierce as ever, and some are chafed that their particular components are not being offered two generations of vehicle programs. GM says the approach works only for certain components.

But it is clear through the supply base that GM is trying to improve its supplier relations. The automaker's approval ratings moved sharply higher in this year's closely watched Planning Perspectives survey of suppliers. And the initiatives have gone from talking to bearing fruit just in time for some of the industry's biggest vehicle programs.

German air-filtration maker Mann+Hummel is riding one of those waves.

Mann+Hummel is supplying systems on several of GM's midsize and large crossovers, including the recently launched GMC Acadia and Cadillac XT5. That platform, C1XX, will underpin at least a half-dozen models. Mann+Hummel was brought in under one of GM's new-leaf initiatives -- and none too soon.

It was late 2013, and the supplier had just lost out on two major GM programs: The next-generation Chevy Cruze compact, launched this spring, and GM's new Epsilon midsize car platform, which underpins the redesigned 2016 Chevy Malibu and several other nameplates.

Mann+Hummel had supplied the previous Cruze program but lost the new one. In response, it went all out for the Epsilon contract, spending more than $1 million on r&d and manpower.

For Mann+Hummel, a 21-time recipient of GM's annual supplier award, getting passed over on Epsilon was a kick in the gut, says Mike Ternes, Mann+Hummel's director of business and product development for the Americas.

The supplier could not afford to continue chasing GM's programs, he says.

That was when GM implemented a new supplier initiative called the Strategic Sourcing Process. GM purchasing execs approached Ternes and his team to discuss multiple crossover programs. They wanted Mann+Hummel on them. And most important, GM made it clear that it was Mann+Hummel's business to lose.

"They set out a very clear road map," Ternes said. "They said: "We want to take a very strategic approach on these big programs. Let's do a lot of pre-development work. Yes, you're going to spend some money. But you're going to be my guy.'"

Mann+Hummel was one of the first suppliers to subject itself to GM's One Cost Model. In exchange for the early commitment to Mann+Hummel, the supplier agreed to allow GM purchasing and engineering staffers to visit its plants and analyze its internal cost data. Under the terms of the deal, each year a cost analysis would determine whether any more savings can be wrung out.

Such a working arrangement might be scary stuff to an auto supplier. But Ternes says GM did not intend the new approach as a blunt instrument to extract better pricing.

"They didn't come in pounding their chest and saying "You're too expensive,'" Ternes said. "They just tried to understand our costs."

The innovation brought about another benefit.

Because GM assured Mann+Hum- mel that it was the preferred supplier, Mann+Hummel could dedicate more engineers to the program earlier in the schedule than it would have in a competitive-bid situation.

The more transparent cost information paved the way for the supplier to offer GM three choices of air-induction systems at different prices -- a sort of a la carte menu of good, better and best component approaches. Mann+Hummel could give GM a choice between less costly parts and pricier systems to reduce engine noise.

"That early engagement allows you to work on multiple engineering scenarios," Ternes said. "In the past, we'd barely have time to do one."

Time is becoming a more valuable resource than ever for suppliers. That's because product cycles for GM and most other automakers are being compressed, leaving suppliers with less time to amortize equipment and tooling over the life of the vehicle program. About seven years elapsed between the current GM full-sized truck platform, K2XX, and the previous one. The next cycle will be squeezed into about 5½ years.

Offering a supplier a contract for two consecutive generations of a vehicle "makes it easier for the supplier to justify giving the automaker a high level of intellectual property," said Michael Robinet, managing director of advisory services at research firm IHS Automotive. "You get two cycles to pay for it. It's gotten to the point where OEMs need to give a stronger commitment because that supplier is not going to give you its best technology without that."

That's what makes GM's multigeneration contracts so enticing, Lear's Scott says. He says Lear is already making investments now that are geared for the generation that follows T1XX, which is probably nearly a decade out.

"When you don't know that you have the next generation, it really limits the clarity of where you can put your investment and your staffing for the future," Scott said.

Even in cases in which the automaker already knows that the next redesign will bring significant changes, earlier involvement with the supplier brings benefits, GM's Kiefer says.

"If you can bring these guys in early and say, "OK, we want to be able to change this after five years. How can we design this now so you can design your equipment and tools now to get the re-use benefit?'" Kiefer said. "That's something we weren't able to do in the past."