In 2008, as General Motors was in crisis and on the verge of receiving a bailout from the United States government, they were trying desperately to reduce costs. On September 26, 2008, they notified their suppliers that they were changing their payment terms effective October 1. Although the letter to vendors attempts to sell the new terms as a benefit to suppliers, moving from a Net 30 to Net 60 payment term, with less than a week’s notice, was the real takeaway.
PYMNTS.com reports that a May 2014 survey of automotive industry suppliers by Planning Perspectives Inc. “revealed GM to be the worst company for suppliers to work with. Among the most common complaints by these suppliers included claims that General Motors is least likely to allow suppliers to raise prices to make up for any unexpected material cost hikes.” With trust, protection of intellectual property, and communication skills other measures of corporate buyers, GM’s ranking is alarming across the board.
It shouldn’t be surprising that positive relationships with vendors confers a range of benefits, including priority access to new innovations and materials as well as more favorable negotiations. Transitivity tells us that if GM doesn’t have good relationships with its suppliers, it doesn’t have priority access or favorable terms, perhaps at a time they are most needed.
Steve Kiefer, recently appointed GM’s Purchasing Chief, coincides with changes in the contract process, one of the strategies General Motors is using to improve ties with suppliers.
It is impossible not to wonder if better relationships with suppliers would have prevented the ignition switch defect or hastened the production of replacement parts. What is certain is that any tension between GM and its vendors is bad news for the company, and, judging from their past reputation, they will need to do more than recognize suppliers of the year to mend the broken relationships.
General Motors Continues Supplier Relations Damage Control | PYMNTS.com.