DETROIT — The push to cut costs is continuing to ripple through the auto industry, but the world's biggest carmaker says it is willing to share its savings with suppliers who come up with new, less-expensive concepts.
General Motors Corp. sent out letters just before Christmas to suppliers promising a 65-35 split on ideas that save the Detroit-based company money on current production models.
GM also promised to share the wealth on projects developed jointly between suppliers and GM engineers.
"We feel it's imperative that GM's supply base remains healthy in order for GM to be competitive in the marketplace," said spokesman David Barnas in a Jan. 2 interview. "Financially unhealthy suppliers cannot offer GM the appropriate levels of quality, service and technology."
Those savings could come from new manufacturing techniques, improved delivery, different materials or a variety of other possibilities, he said.
"We're pretty open so long as we're still able to maintain quality standards," Barnas said.
The letter is evidence of a shift in the public stance for a company previously noted for slashing prices, a policy implemented during Jose Ignacio Lopez de Arriortua's 10-month stint as head of purchasing in 1992 and 1993.
At that time, Lopez's army demanded up to 30 percent price cuts and sometimes rebid contracts in midstream.
The turnaround also hits at the same time DaimlerChrysler AG — previously noted for its friendly relations among suppliers — has changed its management and outlook.
Under former President Thomas Stallkamp, Chrysler developed the Supplier Cost Reduction Effort — or SCORE plan — in the 1990s to share cost-cutting efforts with suppliers and lure them and their new projects to the company.
The plan garnered more than $2 billion in savings annually, but Stallkamp left after Auburn Hills, Mich.-based Chrysler merged with Stuttgart, Germany-based Daimler-Benz AG in 1998.
By November 2000, Daimler had ousted President James Holden and placed German Dieter Zetsche in the top spot in the United States. Among the first moves in an attempt to restore profitability for the U.S. division under Zetsche's tenure: mandatory cuts of 15 percent over three years from suppliers.
"What's unusual about the current program is it totally abandons the SCORE principles and brings out the hammer," Robert Miller, interim chairman and chief executive officer of Federal-Mogul Corp., said during a Jan. 3 meeting with investors.
Federal-Mogul, which makes a variety of parts from headlights to body seals, will negotiate with DaimlerChrysler, he said. But he opposed the outright cuts demanded by the automaker, including the 5 percent drop in prices that was set to take effect Jan. 1.
"They're going to send me 95 cents instead of a dollar on the next shipment," he said. "I have indicated to them that I don't accept that, as I think other suppliers have.
"I was thinking of sending them 95 pistons instead of 100 when they do that, but we're not that way."
Both automakers are going through a change in attitude, said Jon Ball, an auto management consultant with Conway MacKenzie & Dunleavy of Birmingham, Mich.
"It's interesting to see the [original equipment manufacturers] head toward the center," he said. "DaimlerChrysler and GM had wide, disparate approaches in the past."
The timing of the two announcements should give General Motors some positive reactions, although it probably was planning the change long before DaimlerChrysler spoke out.
"I don't think it's just spin-doctoring on GM's part to come out with this announcement at the same time as [DaimlerChrysler]," said Greg Janicki, vice president of automotive consultants CSM Worldwide in Northville, Mich. "It's probably just coincidence."
GM has softened its approach during the past few years, Janicki said. The new cost-sharing program just puts a shift in perspective into writing.
"There's so many back-room dealings with OEM-supplier relationships," he said. "There's lots of things that go on behind closed doors."
General Motors, under new Chief Executive Officer Rick Wagoner, had to have taken notice of the savings DaimlerChrysler wrangled through its cost-sharing programs. Chrysler claimed $1.2 billion in savings in 1997, and another $2.1 billion in 1998.
"DaimlerChrysler previously has shown that kind of approach could work," Ball said.
Most suppliers officially are taking a "wait-and-see" approach to the GM announcement. Delphi Automotive Systems, with 70 percent of its sales to its former parent of General Motors, only will say that negotiations on sales will go through "appropriate channels" — the same response it had to DaimlerChrysler's mandatory cuts.
"There's going to be some skepticism on the part of some suppliers that GM is going to have to overcome," Ball noted.