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GM Promises to Listen to Suppliers More, But Tough Tactics Stay

August 6, 1993

TRAVERSE CITY, Mich. (AP) _ GM’s top purchasing executive doused any supplier hopes Friday that he would scrap reforms imposed by his departed predecessor, which will save the automaker billions of dollars in bills.

Rick Wagoner, in his first speech to suppliers since succeeding Jose Ignacio Lopez de Arriortua as head of General Motors Corp.’s worldwide purchasing, conceded GM might have moved too fast in changing the system.

But Wagoner said Lopez’s innovations, which have forced GM suppliers around the world to lower their prices, would remain.

Lopez abuptly quit GM in March to join Volkswagen, the German automaker that is also struggling with high costs. GM has since accused Lopez and aides who went with him of purloining corporate secrets. They deny it.

Wagoner, who doubles as GM’s chief financial officer, said savings from the global approach will cut $4 billion from its North American parts bill between 1991 and the end of the year.

Cost-cutting has taken top priority at GM in the last 18 months. Its North American business, which brings in 65 percent of revenue, lost more than $12 billion before taxes, interest and health care costs in 1991-92.

Through the six months this year, GM is $1.2 billion in the black on that basis, though it’s likely to show a net loss on the biggest part of its business for the year.

The savings rate on parts has doubled under the global purchasing program, in which contracts are awarded based on who offers the best quality, service and price for a given part. GM originally sought three-year savings totaling 7 percent from North American suppliers for 1991-93.

Speaking at an automotive confererence, Wagoner said GM was confident the global purchasing plan would work because it had a five-year track record of success in Europe, Brazil and Australia.

North American suppliers were incensed by Lopez’s approach, which included rebidding existing contracts, giving one supplier’s designs to another supplier to get a lower bid and demanding price cuts of up to 20 percent.

Despite Lopez’s departure, supplier anger at GM remained. A recent study showed GM’s relations with its suppliers were the worst in the industry.

One supplier said Friday that relations may be on the mend with GM, however.

″I think in the last few months it has improved,″ said Gerald Jusco, vice president of corporate and industry relations for ITT Automotive Inc.

″Over the last 18 months, the crisis was viewed as being supplier costs. What I heard (from Wagoner) is that GM is trying to look at this on a more wholistic approach.″

GM has reorganized nearly all of its engineering and manufacturing functions to get more efficient. Suppliers participate in new vehicle programs earlier in the process and can get lifetime contracts for certain parts.

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