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GM takes next step to strengthen relationship with suppliers

By: Mike Colias
AUTOMOTIVE NEWS

February 26, 2014

DETROIT — General Motors Co. is rolling out an initiative to forge deeper strategic partnerships in its supply base, promising a better business relationship with suppliers that work more closely and openly with the automaker to speed innovations to market.

The Strategic Supplier Engagement program will offer such perks as better access to GM purchasing brass, joint strategic planning and even training to those suppliers that rate highly on several key measures -- from cost containment and other basics to "cultural" aspects such as open communication and technology sharing.

GM purchasing chief Grace Lieblein was expected to outline the plan during a conference call today with about 400 of GM's largest suppliers, which represent about 90 percent of GM's global spending.

The move underscores how GM is leaning on its suppliers more than ever to deliver technology in areas such as safety and fuel efficiency that are becoming the key competitive battlegrounds for automakers. GM risks losing out on those innovations unless it can transcend its historically fractured relationships with its supply base and become a go-to customer for suppliers.

"It's a framework for how we want to work with suppliers and strengthen our relationship with them to become the customer of choice," Lieblein told Automotive News in an interview this week. Automotive News is a sister publication of Plastics News.

Report cards

Among the 400 direct-material suppliers included in the new program, only those deemed "prime" — those that earn high ratings from GM on specified metrics — will qualify. Suppliers that fall short will have a chance to work with GM to improve their performance in time for the next annual assessment, Lieblein said.

GM will assign ratings to its 200 largest suppliers starting in April, while the remaining 200 will get their evaluations in June. A spokesman said GM does not have target for how many of the 400 suppliers will end up with a prime rating. He said the company hopes to work with all 400 to eventually get to that level.

GM will assess suppliers annually in two broad areas. The first is business performance, including quality, cost containment, performance on vehicle launches and supply chain efficiency; the second is cultural performance, which will measure transparency, effective communication and innovation in engineering. The cultural ratings will come from a standard survey of GM's purchasing teams around the world.

Kim Brycz, executive director of global product purchasing, emphasized that the ratings will be transparent and that suppliers will be able to see how they stack up against their competitors.

"We're not just defining our strategic suppliers," Brycz told Automotive News. "We're helping others on how to get there as well."

Benefits of prime

A formal system to improve supplier relations is not a new concept. Ford Motor Co. last summer launched the "2.0" version of its Aligned Business Framework, which began in 2005 as a way to speed innovation by strengthening long-term ties with key suppliers, steering more business to those companies while narrowing its supply base. Ford said last year that 104 suppliers are in the framework, which eventually would represent about 70 percent of its purchasing budget.

Lieblein said the goal of GM's effort is not to pare GM's network of 2,700 direct-material suppliers; smaller suppliers can request to have their performance assessed annually and potentially earn the benefits, too. She also said that prime suppliers aren't guaranteed future contracts, but they will be better positioned to earn future business.

Among the benefits that the prime suppliers will get, Lieblein said:

• Regular access to GM leadership in purchasing and engineering

• Technology "visioning" sessions to hash over GM's future needs for parts and commodities

• Joint planning on "opportunities for growth" for both GM and the supplier

• Training sessions that aren't offered to other suppliers

'We've missed out'

Lieblein acknowledges that GM might have missed out on product technologies because of its lack of a formal system to engage suppliers and access their innovations and ideas before they are scooped up by competitors.

"When we're able to engage them early in the product development process, that allows us to leverage all of that knowledge," she said, rather than GM "handing it over and saying, 'Go make this.'"

"Frankly I think we've missed out -- whether it's on cost, quality or technology -- by not engaging parts suppliers as early as we're doing today," she said.

She pointed to a recent example of how the fresh approach could lead to better features in GM's cars and trucks: an industry-first center airbag for the front row that was introduced on the GMC Acadia, Buick Enclave and Chevrolet Traverse in 2012. TK Holdings Inc., the North American subsidiary of Japanese airbag maker Takata Corp., enlisted GM early in the development of the airbag, which protects the driver and passenger in side-impact crashes.

'A very strong move'

John Henke, president of Planning Perspectives, a suburban Detroit consultancy that conducts a closely watched annual survey of supplier-automaker relations, said GM's plan has the potential to transform its relationships with suppliers -- if it's executed as outlined.

"I don't think there is any other OEM that matches the openness and transparency that this system is set up to achieve," Henke said. "This is a very strong move that shows Grace's concern about building more trusting supplier relations."

GM was long a laggard in Henke's survey, but has improved its standing with suppliers in recent years. Still GM was rated fifth last year out of the six largest automakers, as the sharp gains it had made since 2009 leveled off. And rebuilding trust with suppliers remains a work in progress. Last week, the company moved to quell an outcry among suppliers by reversing or clarifying certain contentious terms that were added to its base purchasing contract last year.

Henke said GM's latest initiative proposes to fix a key flaw in how it and other automakers interact with suppliers: Inconsistent feedback and evaluations that too often seem arbitrary.

"For the first time, they'll have a global, standard process to tell suppliers how GM perceives working with them," he said, "and to tell them what they need to do to improve."