Suppliers Question GM's Payment Timing

Despite a recent WAW survey in which suppliers judged General Motors Corp. the best auto-maker to work with (see WAW - July '98, p.66), reports are trickling out that GM is taking up to 120 days, and in some cases even longer, to pay for work delivered.

GM says it isn't so.

"We did change the payment structure so that checks go out on the second day of the second month, and the reason for that was to commonize financial systems globally," says Dan Jankowski, a spokesman for GM purchasing. "But there's no intent to delay payments. We have substantial cash on hand, so there is really no need to."

At the Society of Automotive Engineers annual retreat at the Greenbrier Resort in West Virginia, more than a few suppliers told WAW they were waiting longer than usual for payment on work they have done for GM.

The problem is not limited to second- and third-tier players.

"It's become more of an issue for us lately than it ever was before," says a manager with a large electronics supplier. "We have one contract worth about $20 million that we delivered on about nine months ago and we have yet to be paid."

As one supplier explains it, once GM awards a supply contract, both supplier and GM agree to set up an escrow-like account. Each contract specifies quality, cost and service goals. If GM determines the supplier does not meet those targets, it deducts money from that account.

In one recent case, a large global supplier thought it had $500,000 in one of these accounts, only to discover that GM had taken all of it without expressing dissatisfaction with the company's performance.

Mr. Jankowski says the practice, referred to as "right to offset," is spelled out as one of the terms and conditions of all the company's supplier contracts.

"For example, if Supplier X sells us $10,000 of something and we find that $2,000 of what they delivered was unacceptable, we only pay them $8,000," he says. "It's something we've done for 14 years, and most every other auto company does too."

Camaro will see new millennium; Prizm future cloudy; Impala bows in January

Chevrolet Div. General Manager John G. Middlebrook claims it's just speculation that Chevy plans to discontinue the Prizm and Camaro when the cars finish their current product cycles in the next couple of years. "Both are valuable brands. Both have strong followings," says Mr. Middlebrook.

The bow tie division chief would guarantee that the cars are part of Chevy's lineup into the early part of the next decade. "Long term, we haven't made a decision on (the Prizm)," Mr. Middlebrook says.

Mr. Middlebrook will leave his position Jan. 1 to become general manager-vehicle brand marketing in GM's new Vehicle Sales, Service and Marketing Group.

Camaro's sales through the first nine months of this year are off 16% from last year's pace. Over the same period, Prizm sales have fallen 27%.

Given the platform consolidation unfolding at most competitors, the prospects for additional paring of GM's product portfolio are strong.

Obviously, Chevy folks prefer talking about the seven new vehicles they will introduce between this fall and the end of 1999. These include the '99 Tracker, Silverado, the hardtop Corvette, the '00 Tahoe, Suburban, a new Monte Carlo debuting next February at the Chicago Auto Show, and the revived Impala sedan, which will anchor Chevy's exhibit at the North American International Auto Show in Detroit.

"The Impala will give us a six-passenger sedan that we need to compete," says Mr. Middlebrook. "It will have large-car interior room. It'll have an exterior that's sized to be agile in city traffic and for parking. We're defining Impala as 'American Driving Excellence.'"

New Internet Tool Starts Paying Dividends

At Taylor Steel Inc., it didn't take long for management to understand the benefits of the Automotive Network eXchange (ANX), a new, high-speed, private communications link for automotive suppliers.

The Stoney Creek, Ont., company receives large coils of sheet steel from mills and cuts them down to narrow coils, which are promptly placed back on trucks and shipped to stampers. The company already communicates with customers through electronic data interchange (EDI), but the dial-up link is slow.

Some customers are located only 15 minutes away, and almost always the truck arrives with a new steel coil before Taylor receives the order electronically. What follows then is a flurry of hand-written work orders and shipping tags - and frustration on the shop floor.

That has changed. For the past several weeks, Taylor and one of its customers, Dofasco Inc. of Hamilton, Ont., have been using the ANX, a private automotive Internet, with measurable success.

Taylor now receives orders in half the time and the truck arrives after the ANX message, says Paul Krikke, Taylor's information systems coordinator. With ANX, Taylor's phone charges are down 75%.

The Automotive Industry Action Group launched ANX in December 1995 as a secure link for automakers and suppliers to electronically conduct business more efficiently.

Thirty trading partners, including General Motors Corp., Ford Motor Co., DaimlerChrysler AG and 27 suppliers, planned to start using the network after Nov. 1, when certified Internet service providers, including EDS, began delivering the ANX service.

GM expects suppliers of engineering services to use the ANX for exchanging math data. It will eliminate the need for GM to link some suppliers to its internal network, as it does now.

The biggest advantage: shorter vehicle development cycles because data can be shared almost instantly without shipping computer tapes, says Johanna Harper, GM's program manager for supplier electronic commerce. She sees great potential.

"If you're a company that isn't doing much electronic commerce already, this is probably a giant leap," Ms. Harper says. "But this is the forefront of technology, and it's the way we will do all business in the future."

Nissan Has New Product, Concepts; Now It Needs Buyers

In the short-term, Nissan Motor Co. Ltd.'s "Back to Basics" plan relies on a revival of its Z car, a curious-looking sport/utility vehicle called Xterra that goes on sale in the U.S. next summer, and a concept sport/utility truck. All will be shown at January's North American International Auto Show in Detroit.

Yutaka Katayama, Nissan's first U.S. president and Z car pioneer, envisions the reincarnated Z car competing with BMW Z3 and Porsche Boxster, but at a lower price. "It will not be a very expensive sports car - it will go more popular, so it will sell," Mr. Katayama says.

But Nissan still is staggering under a debt load of about $30 billion. Its U. S. sales through the first nine months of this year are down 18% from a year earlier. Nissan's Japan sales through August are running 12.4% below a year earlier.

None of that has prevented Japan's second largest automaker from sculpting innovative new concepts.

The SUT is a mix between a sport/utility vehicle and a pickup, featuring two rows of seats and a cargo box. Opening up the rear window and folding down the second row of seats can increase bed space.

"We think it's a segment buster," says a Nissan spokesman.

Unexpected Retirement for Visteon's Szuluk

Of all the resignations handed in during Ford Motor Co.'s recent management shakeup, none is more surprising than that of Charles M. Szuluk, the president of Visteon Automotive Systems.

Only 55, the warm but hard-driving Mr. Szuluk is responsible for catapulting Ford's huge but faceless captive partsmaking unit into the global marketplace with a new mission and a high-profile image.

A little over two years ago Mr. Szuluk was charged with the task of turning the sleepy Ford Automotive Products Operations (APO) - which had virtually no business outside Ford and no marketing department - into a major global supplier with 20% non-Ford sales.

The "Visteon" name received decidedly mixed reviews when it was announced at the Frankfurt Auto Show in October 1997, but a marketing and media blitz now has the name firmly entrenched in the global automotive lexicon.

Visteon's net income for the third quarter of 1998 was a record $150 million, up 32% from the same quarter last year. For the first nine months of 1998, net income was $580 million, up 23% from 1997. Visteon also won more than $1. 8 billion in new business, 45% from non-Ford customers. That's well ahead of the full-year target of $1.5 billion, Mr. Szuluk says.

Word is that Visteon is so eager for GM business that it is quoting prices that in some cases are more than 40% below competitors for components and systems.

Mr. Szuluk, thanks to his accessibility and good nature, is well-liked by the media, even though he sometimes is painfully circumspect with reporters eager for details.

Lots of rumors surround his departure, but the family-oriented Mr. Szuluk insists he's done what he set out to do and now wants to concentrate on lowering his golf handicap (It's 11). Craig Muhlhauser - who Mr. Szuluk hired a little over a year ago to put together a marketing organization from scratch - takes over as president. In a joint interview, both men say there will be no major changes in Visteon's strategic direction.

However, numerous staff changes are being made below the top, effective Nov. 1:

Alexander J. Preston becomes vice president-supply and process leadership, while James B. Smith III is named vice president-business planning and strategy, a new position. Appointed vice president and general manager of their respective divisions are Stephen W. Delaney, interior systems; Marcos S. Oliveira, electronics systems; Roger B. Saillant, powertrain control systems; and Paula Winkler-Doman, glass division. Rohintan K. Deputy becomes director of advanced technology.