Breach of Faith

German supplier Kolbenschmidt Pierburg AG is reeling from General Motors Corp.'s decision to reduce installations of its 3.0L and 3.2L V-6 engines produced at the auto maker's Ellesmere Port, U.K., plant.

The 3.0L was to be used in both the Saturn Vue and L-Series. GM later decided to use Honda Motor Co. Ltd.'s 3.5L V-6 in the Vue. Additionally, 3.2L volumes have been reduced on the Cadillac CTS, which now gets a 3.6L V-6 in lieu of the 3.2L when mated to an automatic transmission.

The supplier had a contract with GM to engineer and assemble an integrated air-fuel module for the Vue. Kolbenschmidt Pierburg was set to build the magnesium manifold for the engine, while integrating the fuel injectors into the finished module.

GM's decision not to install the engine in all the promised vehicle lines caused Kolbenschmidt Pierburg to miss its volume and profit targets for the project, a move which CEO Gerd Kleinert says came with no warning from the auto maker. The supplier is deciding whether to accept future business from GM.

GM and Ford Motor Co. remain among the worst when it comes to supplier relations in the crucial European market, Kleinert says, adding that OEMs must begin to change their practices when it comes to correcting their balance sheets on the backs of suppliers.

“All the European and German (suppliers) I have been around (said) their No.1 issue they have all the way around is (relations) with GM and Ford,” says Kleinert, in off-the-cuff remarks at a product briefing with reporters in Wolfsburg, Germany.

Kleinert says his company does $100 million in business with GM on an annual basis. While that may be significant, Kleinert says he can't continue to accept arbitrary cost reductions from the world's largest auto maker when other auto makers in Europe and throughout the world are closely watching how far GM will go.

Kolbenschmidt Pierburg cannot yield to GM's price reduction demands because it would have to do the same for other customers, says Kleinert.