DETROIT – No one can say General Motors Corp.’s vice president of Global Purchasing and Supply Chain sugarcoats his words.

“2006 was a difficult year for us at GM, but it was a better year for GM than its suppliers,” Bo Andersson tells hundreds of supplier executives packed into the auto maker’s exhibit at this week’s North American International Auto Show here. “It is clear to me and clear to you 2007 is going to be another challenging year.”

In 2006, GM took steps to reduce its U.S. hourly headcount by 34,000 employees (about 30%) through buyouts and early retirements, and the auto maker plans to close or scale back production at 12 North American plants by 2008. GM reported a net loss of $3 billion through the first three quarters of 2006.

In his speech this week, Andersson pleads with suppliers to continue supporting GM and to keep open channels of communication with regard to product engineering, quality, delivery and waste elimination.

“I challenge you to challenge us. If you do that, we will grow, and you will grow,” he says. “If you challenge us, we will perform better. We will challenge you – you know that. Can we improve? Yes. Can you help? Yes.”

After comments by Andersson and Jim Queen, vice president-Global Engineering, GM Purchasing honored 15 top suppliers: Autoliv Inc., Bridgewater Interiors, Cadence Innovation, Continental AG, Dicastal Wheel Manufacturing Co. Ltd, Freescale Semiconductor, Johnson Controls Inc., Hella KGaA Hueck & Co., Hoegh Autoliners, Hota Industrial Mfg. Co. Ltd., NGK Sparkplugs, Plastic Omnium, Ryder Logistics, Takata Corp. and Yazaki North America Inc.

It is the sixth year in a row GM has recognized supplier excellence in a special presentation on the floor of the Detroit auto show.

Andersson says GM suppliers, overall, are showing significant improvement in component quality and in 2006 recorded a mere 25 defective parts per million.

“Is that the perfect way? No. We need to work together to improve that,” Andersson says. “We still had probably 100 spills – major disruptions in our supply base – last year. If you don’t know what a major disruption or spill is, don’t even go there. It’s something bad.”

Andersson says GM and its suppliers want exactly the same thing: the best component price possible. The challenge, he says, is finding the workable middle ground.

“We made good progress in ’06, and we will continue that in ’07,” he says with regard to price negotiations.

Despite the difficult challenges ahead, Andersson says he is “very happy to have this job. The job security for this job is great because no one wants it.”

He declines to discuss progress his office has made in attempting to help bankrupt Delphi Corp., its biggest supplier, sell some of its facilities.

But he points to GM’s new cross/utility vehicles (the Saturn Outlook, GMC Acadia and Buick Enclave) as a program that has been successful because of the hard work of many suppliers, including Johnson Controls, which coordinated interior integration and produces the seats in a joint venture with Bridgewater.

Several years ago, GM was eager to outsource interior development to Tier 1 suppliers, but that strategy was scrapped in 2004 as the auto maker decided it needed to assume greater control of interiors.

“Today, we do most interior work ourselves,” Andersson says. “We’ve gone from doing everything in-house to doing everything outside. I think today we have the perfect middle ground.”

But it appears doubtful other future GM vehicle programs will involve such heavy involvement of a supplier as an interior integrator.

“You will see more vehicles with that level of interior execution,” Andersson says. “That’s our first focus. How we do it is not that important. We’ve talked a lot – about the grades of interiors, the level of specification, the (design) harmony – all that is internal at GM.”

Andersson also credits Cadence Innovation (the formerly bankrupt Venture Industries) with taking over the instrument panel assembly for the Outlook program from bankrupt supplier Collins & Aikman Corp.

In the span of nine months, GM Purchasing says Cadence opened a new plant, installed a paint line, moved 75 tools and met every program target on time.

“I’m very happy that we moved the business a year ago from C&A, and Cadence did a helluva job,” Andersson tells Ward’s.

Also on hand at this week’s GM supplier event was Akhil Puri, executive director-electrical vehicle, powertrain for GM Purchasing.

Andersson dispatched Puri to China in November 2005 to oversee purchasing in that key region, as well as global purchasing for electrical/electronic components.

Today, Puri oversees 150 buyers and managers worldwide in electrical/electronics, as well as 200 purchasing staffers across all component sectors in China.

Although China is better known for good prices than for top quality, Puri says that is a “big misconception” in the industry.

“What we have found out is, based on the shipments from China to the U.S. and the rest of the globe and based on facts and metrics, the suppliers in China can be compared to the best of the best in the world,” Puri says.

“We have parts coming from China for the GMT900 (fullsize truck and SUVs), and you have seen how the launch has gone. No issues,” he says.

Andersson calls on suppliers to “not give up” on GM. “I thank you from the bottom of my heart,” he says. “Stay with us. We will take care of you.”