I have not been able to verify this quotation. According to a good source, Bo Anderson, General Motors’ Vice President, Global Purchasing and Supply Chain, has said that he likes it when a supplier goes out of business as it shows him that he is getting the lowest price possible. I kind of hope my source is wrong. Because if it is true, what an arrogant and stupid thing to say.
GM, Ford, and Chrysler’s corporate headquarters are within 30 miles of my office. They used to be called the “Big 3,” but since their combined US market share fell below 50% for the first time last August, the “Detroit 3″ seems like the proper moniker.
I worked for GM for six years and have many family and friends employed by the “Detroit 3″ in labor and management positions. Through Patti Engineering, I also have managed various projects in most of the automotive assembly plants in the US (both foreign and domestic nameplate).
So what is the problem? Many people point to high US labor costs and the fact that vehicles can be built cheaper overseas. I don’t buy into that. If that were the case, why do Toyota, Honda, and Nissan build nearly 80% of their US cars domestically?? Shipping cost and distribution logistics cause another set of headaches when producing in foreign countries. I also have observed that American workers are smarter and more efficient than their foreign counter-parts.
In my opinion the problem with the “Detroit 3″ comes from their corporate culture which lends itself to adversarial relationships. These relationships are found in 3 different areas:
An Adversarial Relationship between Management and Labor: The UAW has been fighting for years to get into the Honda and Toyota Plants. They have been unsuccessful so far. Most workers I have dealt with in these facilities see no need for the UAW. They get good pay, great benefits (onsite daycare, a world class workout facility) and are very happy. I can write a whole another post on the pros and cons of the UAW (and may someday), but needless to say the relationship between the UAW and Detroit has a history of being tense and adversarial. The last UAW contract was more sane than recent contracts and provides hope that the “Detroit 3″ and the UAW realize that they need to work together to ensure both of their survivals.
An Adversarial Relationship between Different Departments: There are too many turf wars that take place inside the “Detroit 3.” When working with the Detroit 3 you see this first hand. There are lots of grey areas as to who the decision maker is in regards to your project execution. As a vendor, you better be SURE to get any decision in writing as another department will later come by, flex their muscles, and force you to make a change. Working with a transplant, you do not get this at all. There is one person who is empowered to make all of the final decisions for that particular (though he will get input from different departments). It saves a lot of change orders.
I have also observed first hand where a really valuable employee will never be promoted. His supervisor realizes his importance to the department and does everything possible to hold onto him. As less qualified and talented people get promoted to other departments, the talented employee may become apathetic, burnt out, or leave the company.
Consolidation of like groups has been taking place and needs to continue to take place. GM no longer has a BOC, CPC, and Truck & Bus controls group, but instead has one group called CCRW (Conveyor, Controls, Robotics, and Welding).
An Adversarial Relationship with Vendors: When I worked at GM, the superintendent of my department used to have vendors take him to dinner and he would order two lobster dinners for himself and one to go for his wife. Working for GM, we figured vendors would only answer “how high” when we told them to “jump.”
This type of abuse is mild compared to the wringer that the “Detroit 3″ now puts their suppliers through. Too often the suppliers readily line up and take a program thinking that volume will make up for tight profit margins. When that volume never comes, or raw material prices go up, the supplier is in trouble. Bo Anderson, and his counterparts at Ford and Chrysler, will not give any relief to the vendor and another company such as Plastech is in Chapter 11.
Guardian Industries, privately owned by Bill Davidson, has continued to make money as an automotive supplier in these tough times. How have they done it? A good friend of mine, Michael Caruso, once sent me an article about Bill Davidson where he answered that question by stating “we have learned to say ‘no’ to our customers.” By that, he meant that he will not go along with unfair customer demands. It is a lesson a lot of suppliers should take to heart.
Conclusion: Can things be turned around? There is lots of talent in these companies, and you can sometimes see glimmers of hope such as the 2007 UAW agreement and the recent success of the Cadillac nameplate. If one of the “Detroit 3″ has a talented leader rise to the top then a great comeback will happen. That leader will change the corporate culture of the “Detroit 3.” He will have to implement:
- Open, honest communications on all fronts.
- Stress innovation in the products.
- Make purchasing a lieutenant rather than a captain.
- Develop win/win relationships with a select group of key vendors.
- Foster and grow the talented personal that the company already employees.
