Former Detroit Piston-turned-auto supplier Dave Bing is leading a full-court press at U.S. automakers to keep minority-purchasing goals alive as they hand off more systems work to large, Tier 1 suppliers.
Seven minority suppliers interviewed recently by Crain's Detroit Business, a sister publication of Plastics News, said only a handful of systems suppliers seem committed to the automakers' minority purchasing programs.
So they're pressing the automakers, through minority supplier councils within the companies, to develop more rigorous auditing of minority purchasing, and to establish consequences for Tier 1 suppliers that fall short of goals.
``You may have a few majority Tier-1s who believe in the program; the other ones go through the motions,'' Bing said. He would not name specific companies.
Chain Sandhu, Chief Executive Officer of Livonia, Mich.-based plastics component supplier NYX Inc., said he has seen companies that dealt directly with automakers relegated to Tier 2 status as a systems supplier took on more responsibility. He declined to name them.
That can put a minority firm in a tough spot if the systems supplier is not committed to developing minority suppliers, he said.
Bing and other suppliers want automakers to step up their oversight of systems suppliers' minority purchasing. That's because many of those Tier 1 suppliers are reducing the number of suppliers they use. That affects all Tier 2 suppliers, not just minority-owned ones.
Automakers have steadily increased their minority content in the past several years. In 2003, General Motors Corp. spent $7.2 billion on parts built by minority-owned companies; Ford Motor Co., $4.6 billion; and DaimlerChrysler Corp. $3 billion.
As more large-system work is farmed out, much of the opportunity for minority-supplier growth will come at the Tier 2 level, said V. Diane Freeman, senior manager of supplier diversity at GM.
``We've stepped up our efforts to look at our Tier 2 spending,'' she said. ``It's an evolving process and it's going to get better.''
For example, GM last year gave Lear Corp. complete responsibility for its future luxury-car interior program. That means Lear, not GM, directly manages Tier 2 suppliers. Sandhu said Lear is one of the better Tier 1s working with minority suppliers.
Automakers often direct Tier 1s to work with specific Tier 2 suppliers and that's where several minority-owned companies found success.
Continued support from automakers is critical, said William Pickard, CEO of Detroit-based Vitec LLC, which makes blow molded fuel tanks. It's the automakers that began minority-supplier development so they had suppliers that looked like their customers. Several joint ventures and contracts were created by the automakers.
``If not for the customer, those who are Tier 1 on joint ventures would not be Tier 1 players,'' Pickard said. ``If not for that, we would all be second, third or fourth [tier].''
All three automakers said they have a system in place to keep track of a Tier 1's minority-sourcing numbers. But they also said some Tier 1s are further along than others.
``We have to lean on our first-tier suppliers and get them to understand our position,'' said Ray Jensen, director of supplier diversity development at Ford Motor Co. ``We will lead and teach, because there is a learning curve. This isn't a social program. It's a business imperative.''
What the minority suppliers want to push is details. GM outlines its minority-buying requirements with its Tier 1 suppliers every year. GM requires them to buy at least 8 percent of a supplier's GM purchases with minority-owned companies, said Freeman. GM also has a director to work with 50 key minority suppliers and each has a GM mentor to work on business plans.
The world's largest automaker still hasn't decided how to handle Tier 1 suppliers that fall short of goals. Random audits check a Tier 1 supplier's reported numbers on minority sourcing with reality.
Bing said he'd like to see random audits, and said Tier 1s that don't meet goals should lose business.
Two Tier 2 suppliers that say they have successful minority development programs both have a person dedicated to the effort. The trick is to find the right minority suppliers and give them more and more business with each success. A bidding system also has to be open, said John Knappenberger, vice president of administration for Rochester Hills, Mich.-based Dura Automotive Systems Inc.
``It's become ingrained in our process,'' he said. ``We just don't quote regular suspects. ... There's an opportunity to find suppliers that could be longtime, good suppliers of ours.''
Linda Theisen, vice president of supply-chain management at Plymouth, Mich.-based Metaldyne Corp., said automakers are a good source of minority suppliers a Tier 1 might not know about.
``Its no different than looking at low-cost countries,'' she said. ``You need somebody to identify who those players are. It's very similar.''
Bing said he'd also like automakers to study whether joint ventures are a good way for a minority company to gain technical expertise. Most of the minority suppliers interviewed by Crain's Detroit Business said joint ventures allowed them to grow and grab Tier 1 business.
But Frank Venegas Jr., chairman and CEO of Detroit-based Ideal Group Inc., said larger joint venture partners also are wary of creating a competitor.
``With my first [joint venture], it was always about convincing them we weren't going to compete with them,'' he said.
The manager of supplier diversity at DaimlerChrysler said that can be solved by structuring joint ventures properly.
``When people come to me and ask about joint ventures, I tell them that it should have a defined life for the duration of a project,'' said Jethro Joseph, senior manager of diversity supplier development. ``There should be a transfer of skills and, at the end, the minority person owns the joint venture. If that happens, you don't have problems. You have to do away with that noncompete clause. If you don't agree to that going in, then you have a problem joint venture.''
Minority suppliers say the automakers so far have communicated well and listened to their ideas.
They want to see that continue.
``As long as the customer is interested in building strong minority companies, I think we're going to be OK,'' said Ron Hall, president of Detroit-based Bridgewater Interiors LLC.