DETROIT—Big Three automakers are turning up the heat to force more than 50,000 suppliers to replace their companywide computer systems by the end of next year.
The issue galvanizing the industry is the so-called year 2000 computer glitch, a situation that could shut down entire operating systems—and many firms—after Dec. 31, 1999. While automakers are working internally to remedy the dreaded millennium bug, they are counting on their parts, material, equipment and ancillary suppliers to do the same.
This fall, automakers will hand suppliers grades on their progress, based on supplier self-assessment surveys that will be sent by the Big Three, working with trade association Automotive Industry Action Group in Southfield, Mich.
In addition, carmakers may ask suppliers to guarantee, in writing, that they will complete the compliance process before future parts or materials are shipped.
The cost of changing a company's computer systems could run into hundreds of thousands of dollars, and testing new systems alone can take up to a year, industry sources said. Research company Gartner Group of Stamford, Conn., estimates that, globally, it will cost $300 billion to $600 billion across all industries.
In February, an AIAG task force began developing common standards among the automakers to replace computer codes. The automakers also have sent three letters to suppliers on AIAG letterhead urging year 2000 equipment reviews. The letters were signed by purchasing Vice Presidents Thomas Stallkamp of Chrysler Corp., Carlos Mazzorin of Ford Motor Co. and Harold Kutner of General Motors Corp.
Most carmakers say they cannot afford to work with suppliers that take the matter lightly. Those who do not replace their systems by the end of 1998 could suffer, said Ralph Szygenda, chief information officer of General Motors Corp.
``Companies need to treat this seriously, as one of the greatest technological challenges of our time,'' Szygenda said after a speech Aug. 26 at the Auto-Tech 97 conference in Detroit. ``It will be difficult for us to do business with any company that does not look closely at complying.''
The difficulty stems with existing lines of computer code, which use two-digit figures for each year. The current code on many systems translates ``00'' as the year 1900 instead of 2000, which can cause a system to malfunction or shut down. To solve the problem, new code language needs to be installed.
Any company microprocessor can be affected, Szygenda said. That includes process controllers, electronic security systems, bar-code scanning equipment, diagnostics technology, computer-aided design/manufacturing systems, inventory controls, climate-control systems and even computerized elevators.
GM plans to evaluate 2 billion lines of code on 7,000 computer systems by the end of 1998, Szygenda said. But the concern is that suppliers, who send parts and materials on a regimented, just-in-time basis, might not be as proactive. And that could inflict damage on production, he said.
If nothing else, companies that do not repair the problem will be rendered almost helpless to compete, said computer consultant Joseph Licavoli of CBSI Inc. in Farmington Hills, Mich.
``You have to find all the applications first, and that can be difficult,'' he said. ``But the alternative is that a company will lose its competitiveness suddenly when it's not able to get a product out the door.''
Two Detroit-based management firms, Deloitte & Touche Consulting Group and Coopers & Lybrand LLP, were hired last week by AIAG to help monitor readiness.
This fall, about 50,000 Tier 1 suppliers worldwide will be asked to fill out the 100-question self-assessment survey. Its purpose is twofold: to help automakers determine how far down the path suppliers have gone, and to fire a warning shot.
``This could set off alarm bells in the supply community,'' said partner J. Ferron of Coopers & Lybrand. ``We get the feeling that a lot of suppliers mistakenly think they are doing enough already. They'll have a greater sense of urgency after the survey goes out and they see the enormity of the problem.''
In addition, the carmakers are setting up a ``war room'' at AIAG offices to monitor suppliers' activities and distribute information. Many compliance tools will be available over a special Web site. The association has also scheduled educational briefing sessions and has produced a two-hour video.