CLEVELAND - General Motors Corp. wants its molders to purchase resins through GM, allowing it to leverage the massive buys into volume cost cuts.
The resin resale program is not mandatory, but participation will play into future sourcing decisions, said Mary Blair, global commodity manager for corporate raw material for Detroit-based GM.
The program has existed for several years, and ``numerous'' suppliers have taken part in it, Blair said. The difference now is that the company will use it as part of the overall criteria as to which supplier receives a contract for a specific component or module.
``If I had two suppliers out there that went into the final round, one participated [in the resale program] and one did not, I could ensure that the one that was participating would not be at risk from fluctuating prices,'' she said.
The idea, Blair said, is that General Motors can leverage its entire buying might for chemicals ranging from plastics to paint and solvents, and help cut the potential for price fluctuations while also ensuring overall quality supply ``all the way back to the oil well.''
That is buying and quality power that most firms do not have.
The automaker then has some assurance that molders selected for components can continue providing quality systems, without suffering from wide price changes that could impact their long-term survival, she said.
But the program could mean molders will miss out on their own volume discounts, Jeffrey Wincel, vice president and general manager of Donnelly Corp.'s modular systems business unit, said during a June 20 panel discussion at Plastics Encounter in Cleveland.
While participation in the resale program is voluntary, it will have to play into suppliers' long-term decisions, since failing to take part could mean risking future contracts.
``You're really put in a difficult situation,'' Wincel said. ``You need to satisfy your customer. If you don't satisfy your customer, you don't get new business. If you don't get new business, you don't make profits.''
North American automakers have been revising their relationships with suppliers for years, seeking givebacks, rebates and forcing warranty and development programs further down the supply chain. The revised GM resin program is just one example, he said.
Late last year, DaimlerChrysler AG was the focus of suppliers' wrath when it stated it would require a 5 percent price cut by the start of 2001 and another 10 percent cut by the end of 2002. It eventually had to negotiate with some suppliers to phase in reductions, but the resulting ill will has left some companies with a sour taste in their mouths.
Automakers that take a hard-line approach risk missing out on new technology, Wincel noted, since suppliers that develop a new system are more likely to bring it first to a friendly face.
``Suppliers are being told unless you do this, unless you do that, you're going to be gone,'' he said. ``So the suppliers are saying, we're just not going to give you the technology.
``As this cycle continues, the [original equipment manufacturers] realize they're not going to get the technology and they're going to have to back off and change the way they do business.''
Donnelly has stepped back from certain customers in the past because of those kinds of problems, he said. The Holland, Mich.-based maker of interior and exterior mirrors cut back on GM in the early 1990s when the company took a hard line during Jose Ignacio L¢pez de Arriortua's 10-month stint as head of purchasing.
Donnelly continued developing new technology, however, so that eventually it won back GM business but with better terms.
When customers cut costs and times get tough, processors have to plan carefully for their future survival, said Chain Sandhu, owner and president of NYX Inc., a Livonia, Mich., molder of interior and under-the-hood components.
``You have to know going in what your cost is,'' he said. ``If you don't know what your cost is, you're going to be one of those companies that [doesn't survive].''
That means having good machines that can produce quality products, having technology that others do not have and having confidence to take on projects others cannot. NYX maintains a 24-hour design operation, with offices both in Michigan and in India.
No one can make it without knowing their core competence, or relying on 20-year-old machines that cannot stand up to the task at hand.
``What we are trying to find is that we know when to say no,'' he said.
Many of the complaints coming from auto suppliers are the result of programs designed by automakers to provide short-term cost-cutting results, rather than providing long-term growth strategies, added David White, director of sales-composites for Dearborn, Mich.-based Meridian Automotive Systems.
So far, overseas automakers that have manufacturing operations in North America have not encountered the same friction with suppliers, he said. Those companies tend to stick to a long-term plan. The transplant or ``new domestic'' automakers are sticklers for last-minute design changes or flaws, but more willing to work with a committed supplier.
``Ten years is short term for a Japanese automaker,'' White said. ``One year can be extremely long term for an American one.''
The GM program is not the only mass purchasing plan under consideration. Covisint LLC still is working out the logistics of allowing automakers and suppliers to use the online purchasing program to coordinate raw resin purchases, and potentially combine orders for volume discounts.
The venture, formed by the North American Big Three automakers last year, would phase in the raw material purchasing program with steel, then eventually expand to resin, said spokesman Tom Hill.
Covisint has not set a date yet for the system. At one point, officials hoped to have steel purchasing for suppliers and automakers set up by late 2000, but the program has not moved as quickly as they had hoped.