Last week, in Traverse City, MI, the annual Center for Automotive Research's Management Briefing Seminars were held, and the topics covered the good, the bad and the ugly.
According to IHS SupplierBusiness the primary discussions covered the “restraining effect of supplier bottlenecks on the surge in new-vehicle sales in the United States; the industry’s struggle to launch vehicles on time and without quality snags; the coming shrinkage of the Detroit 3 supply base; and General Motors’ new rules for suppliers.”
First the good: the automotive industry is booming.
Now the bad: “Many private conversations focused on the difficulty of keeping up with both strong sales demand and the record number of new vehicle launches.”
And the ugly: GM’s new terms and conditions for suppliers “appear to allow GM to get back from suppliers some of the cost of safety recalls – even if the component in question fully complied with GM specifications when it was produced.”
That one is going to give Tier 2 mold manufacturers and molders the willies!
But according to the SupplierBusiness editorial, lawyers analyzing GM’s rules on behalf of the Original Equipment Suppliers Association (OESA) say that “suppliers can be held responsible if GM later determines that a component built to spec poses a safety risk to consumers.”
Given the size of many of these Tier 2 and 3 suppliers, this could prove financially devastating in terms of liability for these companies. This could dramatically cut the number of companies that can afford to do business with GM. Just getting the liability insurance to be a supplier to GM under these circumstances could prove to be impossible for many of these smaller suppliers.
That means that most of the outsourced work will go to large, global suppliers that have the financial wherewithal to buy the insurance and take the risk involved in doing business with GM. SupplierBusiness also pointed out that GM “purchasing chief Grace Lieblein . . . denied that suppliers will wind up with greater liability for the cost of the recalls.” She also said “GM will have fewer suppliers in the future and is looking to bring more work in house.”
Yeah, I imagine GM will have fewer suppliers.
And you can bet if GM can do this, other OEMs will follow suit. And if the automotive industry as a whole can do this, will the medical device industry be far behind?
This is something for molders and mold manufacturers to think about at 3 am.