General Motors Corp.'s decision to bypass Guide Corp. for a crucial truck contract could doom its chief lighting supplier.
``It's dead,'' former chief executive officer of Guide, Dennis Pawley, said of the supplier's prospects after Guide lost most of the headlamp and taillamp business for GM's next generation of full-sized pickups and sport utility vehicles.
Guide has the current GM truck lighting contract. Guide's loss underscores the harsh realities of doing business with GM. But the loss is a bonanza for Guide's competitors.
Four lighting suppliers will divide a contract valued at more than $160 million annually. And their bigger prize could be the demise of GM's former captive lighting supplier, once known as Delphi Lighting. Guide - which Plastics News ranked as North America's 12th-largest injection molder with $428 million in related sales in 2003 and an estimated 300 injection presses - retained just 5-10 percent of the new contract, industry executives say.
The winners are Hella North America Inc. of Plymouth, Mich.; Automotive Lighting Corp. NA of Wixom, Mich.; Magna International Inc. of Aurora, Ontario; and Valeo Inc. of Auburn Hills, Mich.
GM's full-sized truck platform includes nameplates such as the Chevrolet Silverado, Cadillac Escalade, Hummer H2 and GMC Yukon. Last year, production of vehicles on the platform totaled more than 1.84 million units.
On Aug. 5, Guide's owner told employees the company was looking for a buyer. In a letter to employees, consultant B.N. Bahadur, who bought the firm in February 2001, said he is offering Guide to undisclosed companies. According to executives familiar with the pitch, Bahadur's offer in essence is: Pay us for the value of the existing contracts, and you get the two U.S. plants and research and development center, a plant in Mexico, and joint ventures in South Korea, India and Poland for free.
``It's a fire sale,'' said one executive.
Asked about the future of Guide and its 3,200 employees, GM spokesman Tom Wickham said, ``We are hopeful that a buyer will be found.''
But Pawley said Guide's prospects of finding a buyer have been hurt with the loss of most of the so-called GMT 900 truck program.
Pawley is the former head of manufacturing at Chrysler Corp. He left retirement in January 2000 to lead Guide. He quit a year later after a dispute with GM over Guide's future.
Guide of Anderson, Ind., generated about 35 percent of its $430 million in North American sales last year by supplying GM's current generation of full-sized trucks. That business will disappear as GM launches the GMT 900 program in 2007 for 2008 models.
Guide's share of GM's North American lighting business dropped from 75 percent three years ago to an estimated 65 percent today. North American sales have fallen from $600 million in 1999 to $430 million last year.
Guide also is losing its once-vast service parts manufacturing. Molds for taillamps dating back to the 1962 Chevrolet Corvette are being outsourced to Asia, according to United Auto Worker union officials at the Anderson plant. Guide's UAW leadership is not happy.
``Work is leaving the building, and it is just a matter of time before GM finds other suppliers and closes this operation,'' said Dave Hubble, a shop committeeman for Local 663 in Anderson.
The rank and file last summer agreed to a two-tier wage contract paying $12.50 a hour in wages for new employees - half the top rate - because the company needed lower labor costs to win the new truck contract.
Bahadur is not disclosing his plans for Guide. But his past actions could give a clue. After failing to turn around part of a different GM spinoff he acquired in 2001, Bahadur ordered the liquidation of the former Peregrine Inc.'s Oshawa, Ontario, parts-making plant and its 1,200 jobs.
Guide's roots go back to 1906 when it was a motor vehicle lamp repair shop known as Guide Motor Lamp Co. The firm was known as Delphi Lighting before it was spun off from GM in 1998.
Palladium Equity Partners PLC of New York bought Guide in 1998. Two years later, Palladium gave Pawley the task of rebuilding the company. But Pawley could not persuade GM to put in capital. And Palladium was not able to offset Guide's high-cost structure or GM's demands for lower pricing.
A pricing dispute with GM nearly led Palladium to halt production, but that was averted.
Bahadur is CEO of BBK Ltd., a Southfield, Mich., firm that has worked with GM in the past to keep troubled suppliers shipping parts.