Resin suppliers refer to it as a historic battle between two 500-pound gorillas both grabbing for the same banana.
Others call it the watershed mark in rising tensions between automakers and suppliers that threatened to spill over into out-and-out civil war in the Motor City.
Whatever the take, a highly public flap over resin price increases still evokes strong memories more than four years later. The two companies that went to war in 1994 — General Motors Corp., the world's No. 1 carmaker, and GE Plastics, a big dog among automotive resin suppliers — refuse to discuss it.
Other automotive resin suppliers, speaking on background, said some of the same issues in that spat are relevant today. Bitter taste remains on both sides, said David Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan.
``GM was putting a full-court press on every cost it had,'' said Cole, based in Ann Arbor, Mich. ``The company was hemorrhaging cash and had to deal with that. So GM beat the tar out of suppliers to reduce prices. To some extent, that policy still continues, and so does some of the friction.''
Times certainly were tense in 1994 for resin suppliers and GM. A year earlier, in March 1993, purchasing Vice President Jose Ignacio Lopez de Arriortua had left the firm for Volkswagen AG.
Though L0pez's stint at GM was only 10 months, he had cast a lingering spell of ill will with GM suppliers. The GM executive had been dubbed ``L¢pez the Terrible'' and ``Hurricane L0pez'' for his cost-slashing purchasing policies. He dubbed his purchasing team ``warriors'' and told them they were fighting for their automotive lives.
The battle started with visits to more than 100 supplier plants, where L0pez said he would work with parts makers to cut costs. He then sent letters to suppliers asking for as much as 30 percent cost reductions over three years.
Then, in an even bigger shock to the system, GM began scrutinizing all contracts, even those for work in midstream. Many were broken and rebid for a lower price.
Meanwhile, GE Plastics, which in 1994 recorded about $5 billion in sales, had been equally aggressive and hard-headed, according to sources with various resin suppliers. It had grown large and taken a lion's share of the engineering thermoplastics market.
But GE, and other resin suppliers, were forced in the early 1990s to keep a lid on prices, even though resin costs such as polycarbonate were rising. Parts suppliers were blaming resin suppliers for cost increases and putting them on the hot seat, said several sources.
``It was an intense, troubled environment,'' said one resin supplier. ``The raw material people needed to bring prices back to former levels to make any money. We hoped GE could get something done.''
GE decided to raise PC prices as much as 12 percent in the fall of 1994, according to some accounts. GM countered by threatening to stop shipment of current products and tear up current contracts, sources said. The push by GE turned into a standoff that lasted several months. Mid- and upper-level managers at GE Plastics and GM were told not to negotiate, said several sources.
Then GM raised the stakes. An internal memo from Bo Andersson, GM's chemical commodity purchasing head, instructed GM buyers to find new resin suppliers for all GE products. GM began contacting other resin firms for GE programs.
It all ended Nov. 16, 1994, when GM and GE Plastics reached a supply agreement — terms were never disclosed. Several sources said Jack Welch, chief executive officer of General Electric Co., entered the picture, first by talking by phone with GM President Jack Smith, then sitting down with key GM officials.
A compromise was reached, said a former GE manager, that was a balm for a turbulent time.
``As ugly an event as it was, there needed to be a relief valve somewhere in the market. Maybe that was it. Things did simmer down after that, and I think GM has tried to be more reasonable,'' the source said.
Still, the automaker might have won a more lasting victory, said Phil Sarnacke, Midland, Mich.-based business development manager for consultant TownsendTarnell Inc. and a former Dow Automotive executive.
``Despite what everyone says, GM essentially won that battle and kept a damper on resin prices,'' Sarnacke said. ``To offset prices, resin guys said they'd do a lot more design and development work. I'd say that was the way GM held the line and got the concessions it wanted.''
Yet, the environment is different today, said consultant Robert Eller of Robert Eller Associates Inc. in Akron, Ohio. Large global parts suppliers now manage entire programs and have much more resin purchasing clout than GM. And resin suppliers have learned to save production costs in other ways, either by coming up with materials that consolidate parts or creating less expensive formulations, he said.
Cole agreed that the same situation was not as likely today. Automakers and resin suppliers work much better together, he said. At the same time, though, the GM-GE blowup showcased some of the cost pressures that still linger, Cole said.
``While a lot of people didn't like his tactics, Lopez kicked off the revolution in many ways,'' Cole said. ``Nobody finds change easy to do, and they only embrace it when someone else is doing it. The [GM-GE] conflict was a real pivot point for the industry's reformation.''