GM is working with suppliers to reduce costs

Article by Anita Panait, on February 18, 2014

While General Motors benefited from the strong pricing of its revamped vehicle lineup, it will try to get more profitable this year by squeezing its suppliers, albeit in a gentle way. GM is asking its 2,700 suppliers around the world to comb their own supply chains and distribution networks.

"We're not just saying, 'This is in your contract, you go figure out how to do it,'" GM global purchasing chief Grace Lieblein told Automotive News last week. "Let's work together to understand the cost drivers in your business." GM's relations with its supplier have been improving steadily since 2005, according to annual surveys by research firm Planning Perspectives.

Lieblein remarked that GM's latest cost-cutting drive will not be a return to the old-school strategy of going after suppliers' margins. The carmaker made an offer of peace with its suppliers last week by getting rid of several controversial terms and conditions it added in 2013 to its base purchasing contract, terms that suppliers felt have exposed them to greater liability.

According to Lieblein, the standoff with suppliers distracted the parties from "talking to them about technology and quality and driving waste from the system." Lieblein acknowledged that the US carmaker made a "misstep" in 2013 when it revised the contract terms without getting some input from suppliers and implementing them without notice.

Only a few, if any, suppliers went to forgo GM's business due to the concerns, but Lieblein decided to get rid of the contentious conditions as a gesture of trust in the carmaker’s suppliers. She remarked that many suppliers already are collaborating with GM to cut costs. "It could be waste in the specs we provide for the part. It could be waste in [the supplier's] operations, or waste in our operations," she remarked.

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