The Wall Street Journal has reported that General Motors will allow 400 U.S. and Canada based component suppliers for GM vehicles being produced in Brazil and Mexico to be able to periodically renegotiate their supply contracts. These suppliers are currently challenged with the effects of a volatile foreign currency environment causing rising material and labor costs. At least once per year, suppliers can renegotiate terms when impacted by unexpected external economic factors.
This development is newsworthy because among long time automotive industry watchers, GM has developed somewhat of a past reputation as a strict negotiator with what the WSJ describes as “ironclad” contracts with suppliers. Annual industry surveys ranking the relationship of suppliers with various global OEM’s have consistently ranked GM much lower in past surveys.
This latest move is attributed to support a new GM strategy that involves investing $5 billion over the next ten years to develop a new line-up of Chevrolet branded vehicles for consumer markets in Brazil, Mexico and foreign markets such as India and China. Thus, procurement strategy has taken on a more active strategy to longer-term support product development needs. GM’s new chief procurement officer, Steve Kiefer has reportedly been exploring alternative supplier management efforts with GM’s supplier base since taking on the CPO role in late 2014.
What we believe should go unnoticed is that Keifer’s previous industry background included roles at Tier One industry supplier Delphi Automotive, thus providing a fresh bottoms-up perspective on supplier relationship management. Since taking over leadership of GM procurement, he has reportedly fostered the creation of longer-term supplier contracts that include co-innovation in component design or automotive sub-systems for areas such as safety and more intelligent vehicles. The WSJ report quotes a marketing executive for supplier Magna International as reinforcing that GM has taken on a more collaborative approach with that supplier.
We wanted to highlight this report for Supply Chain Matters readers because it is indeed noteworthy. We thought about extending our “Thumbs-Up” recognition but we will hold off somewhat until there is further history in these ongoing efforts.
However, in the meantime, well-done, GM…