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Old 04-06-2006, 08:50 AM   #1
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two ways of doing things

While GM continues to outsource to cheap labor and employ lowest bid policy, Ford just extended labor conditions standards to all foreign suppliers...

Bell is showing its liberal treehugger Buddhist side finaly.. I like it.


GM, its suppliers walk outsourcing tightrope
Episode highlights the pressure on both GM and its suppliers to take advantage of cheap labor

General Motors Corp. says it has no official policy requiring suppliers to outsource work to low-wage countries. But several suppliers got the opposite message when they recently opened a bid package.

The companies were told in clear language that if they wanted the GM contract they had to acquire more than 30 percent of the parts from approved nations ranging from China to Namibia, according to documents obtained by The Detroit News.

In response to questions from The News, GM launched an inquiry and discovered one of its purchasing employees dummied up the documents without company approval. GM global purchasing chief Bo Andersson immediately sent a missive to employees reiterating that the automaker should not "direct suppliers where to source" parts.

"GM's suppliers must determine how to compete in this hyper-competitive market," he said.

The episode highlights the pressure on both GM and its suppliers to take advantage of cheap labor at a time of unprecedented global competition. GM, which spends about $85 billion on parts a year, is no longer willing to pay $30 for a component that can be made in China for $5. And it now reserves the right to review suppliers' costs and often strongly suggests that uncompetitive suppliers look offshore.

While most suppliers won't speak out against GM and other automakers on the record, they say the message is clear: Outsource or get left behind.

The tensions reflect the delicate task facing GM as it moves to slash purchasing costs, expand into foreign markets and maintain sometimes fractious supplier relationships.

GM, which lost $10.6 billion last year, says it has little choice but to cut costs and take advantage of low-cost manufacturing.

Pressure rises for cheap parts

U.S. automakers are under increasing pressure to find cheaper parts, both out of a need to offset rising costs elsewhere and in order to become more competitive with foreign rivals. Often, that means looking overseas, where suppliers can quote less expensive prices chiefly because of lower wages.

The endless push to procure lower-priced parts has been a major topic of discussion at the 2006 Society of Automotive Engineers World Congress this week in Detroit, with the China pavilion jammed with suppliers wooing new business and low-wage countries lobbying to land new plants.

The amount of auto parts sourced in low-cost countries is expected to double between 2004 and 2007, according to a recent study by Accenture.

A separate survey by Roland Berger Strategy Consultants in Troy predicts that North American auto suppliers will close plants and move as much as 20 percent of their production to low-cost regions by 2010.

The shift is a major threat to the United Auto Workers and other unions representing U.S. auto workers.

"There are some who say those days are over -- that the very idea of decent wages, health care and retirement security for workers has been rendered obsolete by the harsh realities of globalization," UAW President Ron Gettelfinger said in a Jan. 17 speech. "In other words, take the low road. The UAW rejects that strategy because no matter how low you go, some other country will go lower -- not only in wages but in safety conditions, human rights and environmental standards."

Other parts have a future

But recent actions of automakers and bankrupt suppliers such as Delphi Corp. suggest that, while some auto parts may never again be made in the U.S., there is a future for other parts.

GM, for instance, just stopped sourcing spark plugs from a Delphi plant in Flint, which pays workers an average of $27 per hour. The tiny parts are built in Mexico and other regions at a fraction of the cost.

"If you keep the business of selling spark plugs and we can't sell the cars they go into -- the competitors are beating us on a total cost basis," GM Chairman and CEO Rick Wagoner said, "that isn't helping anybody."

Delphi, in turn, plans to shed most of its U.S. plants as part of its reorganization in bankruptcy, but will continue building products such as electronics, safety equipment and heating and cooling systems here because they can be sold at a profit.

High transportation costs and demanding delivery requirements will prevent many large or labor-intensive parts such as seats or instrument panels from being sourced abroad any time soon, said David Cole, chairman of the Center for Automotive Research in Ann Arbor.

"There tends to be an over-anxiety related to outsourcing parts, when it really only affects some types of parts," he said.

Last fall, GM launched a new supplier program aimed at reducing its $85 billion global purchasing bill by 2008 as part of a broad turnaround. Under the plan, GM for the first time asked suppliers to compete on a part-by-part basis rather than live under corporate-wide targets. It also required suppliers to back up bids by opening their books to the automaker.

While some suppliers complain the process is coercive and designed to wring out the lowest price, GM says it protects the automaker and the supplier by ensuring a parts maker has a cost structure to support prices it is quoting and that its prices, quality and delivery scores are globally competitive.

"A lot of suppliers are making noise about this because they are not ready to compete on a global basis," Andersson said in an interview. "What we say is we are working on a global basis today."

'Global footprints' stressed

GM's purchasing operation, staffed by 4,000 employees in 40 countries, manages a network of 3,200 suppliers who build about 160,000 components for the automotive giant.

With GM now selling more vehicles in international markets than in the United States, and sharing engineering functions around the globe, it is encouraging domestic parts suppliers to follow the company into fast-growing regions such as China and Eastern Europe.

In recent presentations to suppliers, GM stresses a need for parts makers to "optimize" their "global footprints" to keep pace with the shift.

Such vague messages may explain why the GM buyer manufactured the document demanding parts be sourced in low-cost regions.

While the form is in direct conflict with stated company policy, Andersson said the employee was not fired. Rather, he defended the worker for his "creativity."

"This guy made a mistake," he said. "He made a lot of this stuff up based on what he felt was right."

GM downplays the incident as an aberration, and said it does not reflect a policy shift regarding low-cost countries.

Despite the outcry over outsourcing, GM says it still buys 99 percent of the parts found on vehicles sold to U.S. consumers from North American sources. That total includes parts that are assembled here, even if they largely consist of components imported from low-cost regions.

You can reach Brett Clanton at (313) 222-2612 or

Thursday, April 06, 2006
Ford extends labor code to foreign suppliers
Changes part of the company's new strategy to build closer, more stable ties with fewer suppliers

Bryce G. Hoffman / The Detroit News

Ford Motor Co. Chairman and CEO Bill Ford Jr. said Wednesday that the company is starting to hold its foreign suppliers to the same "code of basic working conditions" it follows in its own factories.

Bill Ford said the labor policy, which is based on established international standards, provides for training and third-party assessment of working conditions at foreign factories.

"We believe it's the farthest-reaching code in our industry," he said, noting that the same rules were adopted by Ford itself in 2003. "Last year, we extended this code to our suppliers."

The changes were part of the company's new supplier strategy that seeks to build closer and more stable ties with fewer suppliers.

"Addressing the challenges that come with the new global realities we face is essential to our continued success," Bill Ford said.

Tony Brown, Ford's vice president of global purchasing, said the automaker is actively inspecting its foreign partners operations, using both planned and surprise visits to ensure compliance with the new ethical standards. A "cottage industry" has sprung up around the globe to help factories pass such inspections.

"We're not na´ve to that," Brown said.

"If you have a country that is, if you will, less developed in terms of how it treats human rights itself then that would be a higher priority country for us," he said. "We're talking about China, we're talking about Mexico, we're talking about Turkey, Romania and India."

You can reach Bryce Hoffman at (313) 222-2443 or


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Old 04-06-2006, 06:51 PM   #2
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In other contrasts.... Jim Padilla - the boss (COO) of Mercury just announced retirement effective July 1st, to free up the wheel for somoene younger...

This comes days after Wagoner got the vote of confidence from the GM Board..

And Billy Ford talked yesterday about the importance of truth in the Ford NA transmformation... weeks after Wagoner referred to a recommendation based on a deep internal audit the "Saab thing"

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