GM Revamping Purchasing Strategy

General Motors Corp. hasn’t gone soft on its suppliers, but it is working hard to rebuild its damaged reputation with the supply community. Hoping its actions speak louder than words, Bo Andersson, Executive in Charge of GM Worldwide Purchasing, says the automaker now is giving suppliers simple performance targets and measurements and rewarding those who excel at meeting targets with significant new business.

In a speech Friday morning at the Management Briefing Seminars in Traverse City, Mr. Andersson says GM has awarded almost $2.5 billion in new business to its top 165 Supplier of the Year winners: $651 million to chemical companies; $835 million in the electrical area and $1 billion in the metallic marketplace.

“We’re not just talking about rewarding our best suppliers we are actually doing it!” he emphasizes. “Our desire is to develop positive relationships with our best suppliers that are based on performance and supported by clear data,” he adds.

Mr. Andersson says GM’s new, friendlier purchasing strategy offers unique new opportunities to suppliers because it also now is global, and includes the automaker’s numerous joint venture and Alliance partners, (such as Fiat SpA and Susuki Motor Corp.).

“That means our total purchasing value goes from $86 billion annually to $123 billion and all sourcing decisions are made from the same table using the same performance data.”

In other words, suppliers who bring new ideas and technology to GM could see the volume of their business jump in the future if their product or technology is adopted on GM’s high-volume global platforms.

“I want to get to the point where suppliers will look at our business as a blank piece of paper where they can create the best approach,” Mr. Andersson says. “I want them to say: ‘This is what you should be doing.’”

As an example, Mr. Andersson says GM and its alliance partners used to have different specifications for catalytic converter substrates. One substrate supplier (identified later to Ward’s as Corning) developed a standardized single-specification catalytic converter substrate that could be used across the board. For that, Mr. Andersson says the supplier was awarded 70% of the business.

Later a GM spokesman tells Ward’s that Corning actually was awarded 55% of GM’s global business. NGK has 44% and Denso about 1%.

Other highlights:

*Asked about security of intellectual property, Mr. Andersson says candidly: “if it’s proprietary, don’t share it with GM.”

*Mr. Andersson’s advice to suppliers with new technology: “unless we’re signing a contract, don’t show it to us if you don’t want us to take it and give it to another supplier.” GM needs new technology, Mr. Anderson says, but when you can have 25,000 people touching it, there could be some with different motivations, “so I say to suppliers, be careful if you show this to us if we’re not ready (to sign a contract to use it).”

*Mr. Andersson also admits GM has had problems in the past paying suppliers in a timely manner, especially for tooling or rush jobs, saying some of the problems were cases where things were sent to the wrong mailbox and took weeks to reach the proper destination within GM.

*GM won’t abandon suppliers that “want to be fixed and meet the targets.” He admits in some cases, it is GM itself that is the roadblock, but pledges the carmaker’s commitment and resources for those that agree to try to make fixes and do so within a set timeframe.

*It took GM 1 ½ years to realign manufacturing and purchasing. Next step: Engineering. There will be more focus in 2002 on joint efforts to meet cost reduction targets through design and engineering.