DETROIT-Automotive suppliers soon will be forced to deal with a cost-cutting binge that could make them pine for the days of J. Ignacio Lopez. Major automakers plan to cut the cost of producing their next generations of new vehicles up to 30 percent, and they are telling suppliers to do their part. Making those demands - and making money - won't get any easier.
``Hey, this is a cruel world,'' said Carlos Mazzorin, Ford Motor Co.'s vice president of purchasing. ``In this business, we have to look at reality. There is no cushy business anymore.''
Mazzorin made his comments during a purchasing seminar at the Automotive News World Con-gress, held in Detroit in early January. Top procurement officials from Ford, BMW AG, Chrysler Corp. and Honda of America Manufacturing Inc. outlined plans to slash production costs over the next five years. Their goals are reminiscent of the price cuts that Lopez - General Motors' former purchasing czar - forced upon suppliers in1992 and 1993.
Current purchasing executives are not likely to adopt some of Lopez's more controversial tactics. (Suppliers alleged he broke contracts to get lower-cost parts.) But that may be cold comfort to suppliers, who heard these goals:
Chrysler will not grant price hikes to suppliers this year, and it is seeking cuts. The automaker wants to generate $1 billion in savings through its SCORE program for suppliers - including $300 million in cost cuts that could be reached this year.
Honda will cut procurement costs for its next-generation, U.S.produced Accord, due in 1998, by 20 percent. The company has signed contracts with suppliers to meet that target, said Dave Nelson, vice president of purchasing at Honda's U.S. manufacturing arm.
BMW will seek cost cuts of 25-30 percent for its next 3-series sedan, which is due in 1997.
Ford wants to cut component costs by an average of 20 percent by 1999. Ford will absorb part of those cuts, if suppliers make suggestions for more efficient design and production.
The automakers are forcing the moves because they are caught in a squeeze. Consumers are balking at car prices while federal regulations mandate expensive safety equipment.
``We estimate that legislated safety items will add another $400 between now and the end of the decade,'' said Tom Stall-kamp, Chrysler's vice president of procurement.
``We will not be able to recov-er that from consumers,'' he said.
To hold prices down, automakers have embraced ``target pricing.'' Under this system, a firm's marketing experts try to find out what consumers want - and what they are willing to pay. Then the company designs the car to meet that price goal.
Under the old system, a company's engineers would design the car under less severe price constraints. Marketers would then be stuck dealing with the inevitable cost overruns.
But target pricing does not solve a fundamental question: What portion of an auto-maker's cost cuts should be passed along to the supplier?
``Each company has its own system,'' said Don Walker, president of Magna International Inc., Canada's largest parts supplier. ``It's going to be a major issue. There is going to be a lot of screaming and yelling.''
As if that were not enough, the Big Three automakers expect key suppliers to produce worldwide. That will require major investments in new facilities in Asia, Europe and South America.
To coax suppliers into cutting costs, automakers are encouraging suppliers to help design vehicles, and they are getting long-term contracts.
Extended contracts have been a mark of Japanese automakers.
``Japanese companies - especially Honda - are paternalistic,'' Nelson said. ``When we place business with a supplier, we generally assume he will be supplying that product 25 years from now, and 50 years from now.''
But GM is less willing to guarantee business beyond the life of a particular car model, said Harold Kutner, GM's vice president of worldwide purchasing.
``We have a process that is based strictly on competition,'' Kutner said. ``You can call it whipsawing, if you want. But our customers don't care who supplied the horn, the seats or the steering wheel.''
Despite the automakers' calls for cooperation, questions from suppliers in the audience sounded skeptical.
``Almost without exception, the cost targets are ridiculously low to start with,'' said Walker, who had walked stiffly to the podium earlier. Asked whether his company could meet those targets, he quipped: ``That's why I've got a bad back.''