Inside GM's global purchasing; it's a tough process, but they're working toward warmer supplier relations

First things first: If you want to reach the top at General Motors Corp.'s purchasing organization, just pick up the phone and punch in 810-986-2290.

That will get you into Harold R. Kutner's office at GM's North American Operations (NAO) headquarters in Warren, MI, and he promises to take all calls. He's the top honcho: vice president-worldwide purchasing. After that, you're on your own.

Mr. Kutner's open-line policy is only one example of a new and closer relationship with suppliers he's trying to promote after nine months in Purchasing's hot seat.

He even has opened Purchasing's early Friday morning global contract-awarding sessions to select outsiders, including Ward's Auto World, to show how the process works - and just maybe to polish its tarnished image as a heartless, ruthless giant with only one thing in mind: Price.

But it may never become a love-in. For one thing, GM still places $20 billion of its total $70-billion annual buys in-house through its Delphi Automotive Systems group (formerly ACG), often in direct competition with outside suppliers. Delphi, he says, "has come a long way. They're more competitive than they've ever been. We treat them the same as everybody else, but they always have the right of last refusal - the last chance. They are part of the family, so they've always got to have reasons why they didn't get the business."

Given this innate bias, GM has difficulty convincing the independents they're getting a fair shake. But ample opportunities exist to shore up relationships with suppliers: In every survey conducted by WAW and other organizations, GM finishes well behind Ford Motor Co. and Chrysler Corp. in how it deals with suppliers.

Mr. Kutner's crew already meets quarterly with key suppliers, and there are growing instances of increasing interplay between the two parties.

This summer GM Purchasing will launch a new quarterly publication to beef up communications, and a big annual suppliers' conference takes place later this month in Toronto - a black-tie blowout complete with supplier awards.

The strained relationship is a legacy of J. Ignacio de Lopez Arriortua, who arrived from GM-Erope early in 1991 as GM's new worldwide purchasing chief and spent a year turning the place upside down. Two years later he abruptly left to join Volkswagen AG as manufacturing and purchasing chief.

GM Purchasing remains the target of unrelenting criticism among a goodly number of supplier executives because of the swathe he cut.

Their biggest gripe: GM still plays games with their proprietary technology, inviting them to show and tell and then awarding the business to lower-bidding competitors. "I've seen our parts come back to us made by a competitor," one supplier executive charges. Mr. Kutner denies this, saying GM contracts have almost the same language on this score as Ford and Chrysler. "If we're not fair, I want to meet with them," he says. GM's policy, he maintains, is to retain the rights when technology is developed jointly with GM and supplier engineers. "The real experts are our suppliers, from a technology point of view," he allows.

Suppliers also complain that GM continues to favor bidding on individual components rather than total systems, bucking a growing industry-wide trend.

Executives of two large systems suppliers tell WAW they could save GM a bundle in lost time and opportunities if they were permitted to offer engineered systems. So far, they contend, GM has turned a deaf ear, Mr. Kutner says that's changing, and offers several recent examples to prove it.

Mr. Lopez reputedly saved GM billions, and even today he has a large coterie of fans at GM - this despite GM's allegations that he walked off with piles of secret documents that could aid VW, its No. 1 competitor in Europe.

Even his harshest critics give Mr. Lopez credit for doing some things that simply had to be done. He promptly combined GM's 27 separate purchasing organizations into a single entity dealing worldwide to leverage the corporation's massive resources, for example.

Armed with the power of GM's huge volume, he tore up contracts and bid them down until he got the lowest price, pitting suppliers against each other again and again. "A deal is never a deal," was a common supplier utterance.

In the process, suppliers attacked his tactics as often being both immoral and unfair. GM insiders accuse these critics of being whiners who refused to cope with change and couldn't tolerate the competition.

GM was in tough financial shape, was the highest-cost U.S. automaker (it still is), and nothing short of a caterwauling of its supplier pipeline would turn things around, Mr. Lopez's admirers emphasize.

Today, Mr. Kutner says only two visible signs of Mr. Lopez's stormy 12-month reign remain: A health nut, he always kept bowls of fruit in his office and at purchasing meetings. That's still the case. And purchasing executives and buyers convening to award contracts continue to signal their symbolic approval by rapping their fists on the table, also a favorite Lopez practice.

Less visible, but still very much in place are most of the practices and policies he initiated. And from GM's viewpoint, it's working.

"We've gone through a huge cultural change, and strategically it's helping us become more competitive," Mr. Kutner tells WAW. "We've taken purchasing from two quotes and a cloud of dust to a strategic organization with suppliers sharing in our processes."

Unlike the old days, he continues, purchasing's price objectives start with GM's marketing divisions, which focus on what the customer wants and how much he or she is willing to pay.

"The culture in North America has always been that when costs went up, everyone would say `Let's raise the price,"' he says. "If it were not for the yen right now (its soaring value vs. the dollar, adding to Japanese automaker U.S. prices), we'd be in deep trouble. We need to take a meticulous look at cost and waste. The struggle is not over."

The clocks on the wall in the Purchasing conference room show it's 7:30 a.m. in Detroit, 10:30 a.m. in Brazil, 1:30 p.m. in Germany and 11:30 p.m. in Australia.

It's time to get down to business. A triangular-shaped teleconferencing phone sits in the middle of the table, and GM purchasing chiefs in each distant location check in as perhaps 40 buyers and executives gather to award contracts.

The far-off voices are sometimes hard to hear and at one point Bob Campbell in Australia is cut off. "Bob, are you there?" Mr. Kutner asks. "I think we've lost Bob." Then, in a few seconds, "No, Bob's back." By now it's 12:05 a.m. Down Under, and it's Bob's birthday. "Happy birthday, Bob," the group says in unison.

After reviewing the global situation, the first of 18 "presenters" covering North American purchases - most armed with overheads and, in some instances, actual parts - stand up to detail the components or equipment to be purchased, and their rationalizations for the ultimate choices.

It's not all serious. There's considerable friendly banter, and unsolicited remarks. Gulping from a steaming cup, one purchasing honcho simply says, "Ah, coffee! It's our fuel."

At another point, one participant quips that he's had two foreign assignments: "Brazil and Buffalo." A Canadian buyer laments that "I'm fighting Americans every day," while another observer says he's a "Saturn refugee (from Tennessee) camping across the tracks."

Much of what's discussed is strictly confidential because it deals in extreme detail with purchases for GM vehicles going out as far as the 1999 models. WAW agrees to treat details judiciously.

Next month, we'll reveal how it works - if not all the details.