SupplierBusiness (an IHS Global Insight company) recently reported that Chrysler's new purchasing head, Dan Knott, announced that the company is revising its terms and conditions for its suppliers as part of a greater effort by the Detroit Three carmakers to improve their relationships with their supply base. In a report due to be published this month, Knott told SupplierBusiness that "improving supplier relations is his top priority."
In an interview with SupplierBusiness, Knott noted, "A lot of people used to assume that the OEM was king, and everyone aligns with them. If the emperor doesn't have any clothes, nobody tells him. We went bankrupt with that type of process."
Chrysler plans to add a "review board" so that suppliers can air their grievances and settle small issues before they become big ones. Additionally, suppliers will not be dropped from a program without adequate warning, "providing a greater sense of security to suppliers."
Well, it's been a long time since suppliers have gotten the warm fuzzies from their OEM customers-not since the pre-Lopez (GM's global purchasing head in the 1990s) days. And speaking of GM, SupplierBusiness reports that the story is the same at General Motors, where GM's purchasing chief Bob Socia told SupplierBusiness that the company has begun basing part of its purchasing staffs' financial compensation on supplier relations. No longer is it just cost that is important, and Socia told SupplierBusiness, "I have told them that cost and quality are very important-we have got to deliver that. But the supplier relationship is very important, too. Oh, by the way, you are going to be evaluated, you as an individual are going to be evaluated on supplier relationships."
Of course, all this turnaround in attitude by the Detroit Three automakers is a result of the bankruptcies that occurred in recent years among many of the Tier One suppliers. The automotive OEMs are learning what all OEMs need to understand: Without the skills, talents, and expertise-and the good health-of their suppliers, they cannot successfully put out a good product. And as OEMs have thinned their ranks over the past few years, they are coming to rely more and more on their suppliers to do what they no longer have the talent or expertise to do.
That means that while many Tier Two and Three suppliers to big, multinational OEMs might be small, privately held local businesses, they wield more power with the big guys than many believe they do.—Clare Goldsberry