Visteon Corp. has reversed course and stopped asking suppliers for prepaid cost givebacks of up to 10 percent as a condition of winning long-term, lower-priced contracts, a strategy known as ``pay to play.''
The strategy was one of several options Visteon has considered to help winnow its supplier ranks from 2,500 to 500 companies.
Instead, North America's second-largest auto supplier is taking quotations online as projects come up, and will award business to its strongest suppliers across all segments, said Jonathan Maples, Visteon's purchasing chief. That will allow Visteon to weed out weaker suppliers during the next full product cycle, or within four years, he said.
Walking away from the pay-to-play plan came after ``sitting back and thinking, not making assumptions, and listening to what was wrong with that approach,'' said Maples, Visteon's vice president of quality and materials management. ``We'll be a little more conventional and look for long-term potential.''
Previously, Maples said that other options Visteon was considering to generate savings included increased cost-reduction rates over the life of the contract, or absorption of tooling investments.
The pay-to-play strategy was contained in documents sent to plastic injection molders early this year, seeking bids on large groups of parts for five-year contracts.
Visteon told those suppliers the proposals must include a minimum 6 percent annual price reduction, with an upfront check for the first year's savings plus a part of future years' savings to equal at least 10 percent of the value of the contract's first year.
The request was not well-received by some molders - those concerned that they couldn't afford to do business with Visteon.
``What was sent out was more of a request for a proposal - give us your ideas, here's our thinking,'' said Neil De Koker, president of the Original Equipment Suppliers Association in Troy, Mich. ``Some companies took it very seriously and offered Visteon some of their best thinking.
``From the scared ones, they got lots of concerns,'' he added. ``What people were concerned about was that it would happen overnight - all of a sudden they would lose the business and not get time to find business to replace it.''
Visteon had planned to seek similar proposals from other supplier segments that have many competitors and overcapacity, such as small stampings and metal products including castings and forgings.
De Koker said he could not imagine Visteon going through with the pay-to-play plan, knowing Maples' collaborative purchasing style.
``That is not the kind of game you want to play in this industry. I don't even know too many who are in the position to play it,'' he said.