GM Sees Trouble Ahead for Suppliers

The new purchasing chief at gen- eral Motors Co. expects more turmoil in the supply base as production volumes gain steam and says his shrunken organization is learning to do more with less.

Bob Socia, a 34-year veteran of GM who took over from Bo Andersson earlier this summer, also hints GM will start bringing in some suppliers earlier on product programs and says changes he has implemented to the organization so far have borne fruit.

But Socia, vice president-global purchasing and supply chain, admits the health of a supply base reeling from bankruptcies sits high atop his list of worries.

“I'm pretty amazed we haven't seen more troubled suppliers as of this date,” he tells journalists. “However, I'm not sure that is an indication that it is behind us. In fact, my gut tells me we'll probably be facing more troubled supplier situations as the volume starts to come back.”

Socia says he's particularly concerned about suppliers that have not filed Chapter 11 but are in a weakened financial position and may need bank funding to shore up their working capital. “And they might not be able to get it,” he says. “So I think we've got some troubled waters out in front of us for next year.”

Socia estimates GM has about 150 suppliers on a “watch list,” with many already in bankruptcy or on their way out, such as Lear Corp.

Although North American production in the fourth quarter is forecast to finish a mere 0.5% off last year's schedule, it will surpass the July-September tally by some 400,000 units, according to Ward's data.

Sales should rise in 2010 to between 11 million and 11.5 million units from 10 million in 2009, forecasting firm IHS Global Insight reports.

Socia says GM's reorganization out of bankruptcy has shrunk his worldwide staff, which includes purchasing and logistics, by roughly 20% to 6,200 from roughly 7,750 over the last 18 months.

Purchasing, alone, has lost 33% of its workforce, down to 3,100 people from 4,600 globally in 2008. “We can't continue to do all that we did before and operate with significantly less people,” Socia says.

He says he expects no further staff cuts through 2010, and that GM's government overseers have been completely unobtrusive with regard to purchasing.

GM plans to bring in some suppliers on product programs sooner, now that the purchasing group is more closely aligned with the auto maker's engineering unit, an effort Socia's predecessor was unable to fully implement.

“You can't do that with the whole supply base, so we've got to give it some thought,” he says. “We've done it fairly well in the past in some cases. But there probably needs to be more structure put around that so we know who and when we want to engage, and (with) what type of program we want to engage them.”