The Detroit News has attempted to reconstruct how and why General Motors has issues with its ignition switches. It takes a point of view that is different from the usual testimony and gossip we’ve seen so far.
Delphi was a division of General Motors until it was spun off in 1999. As often is the case with these business propositions (remember the “merger of equals” with Chrysler and Daimler-Benz?), everyone was talking about how the move would benefit both companies. But a funny thing happened afterwards—Delphi became one of the many suppliers to GM, being on the receiving end of penny-pinching, strong-arm bargaining for which the auto maker is famous. One consequence of this process is that the winning bidder may have quoted costs so low that corners may be cut to meet the agreed upon price.
Moving forward, both parties eventually knew about a defective part. Why wasn’t it caught and fixed properly? Fixing meant production delays, as the United Auto Workers (UAW) contract stipulates they are paid whether the line is moving or not. If the line was down to address the ignition switch, the money paid to the UAW during this respite would have nixed any savings made during the bargaining process with Delphi. “There were unquestionably times when parts were accepted that did not meet GM’s specifications. But you had to keep the production lines running at all costs,” said one analyst to The Detroit News.
Meanwhile, Delphi filed for bankruptcy in 2005, once having the luxury of General Motors’ support but eventually a victim of the business practices that kept margins low combined with huge legacy benefits.
To read the whole story, head over to The Detroit News.
Comments
It is plausible as this has been how GM and many other have worked with the suppliers for a long time. GM in fact in the last couple years has been working to mend fences with many suppliers too.
This is also part of why the Firestone Explorer issue happened. Ford wanted cheap tires and they go them. As long as they were aired up properly nothing happened but get them low and hot they would blow out. Not a good thing on a top heavy vehicle.
Now mind you the suppliers are not with out fault either as some have gone sub par on their own and GM has had to go after some legally to recoup cost of replacing poor parts.
While GM. Chrysler and Ford all had money issues 10-15 years ago the suppliers also were all on death watch. Many today are gone or sold out.
Even before that many suppliers also took advantage of the lack of communication inside GM. They used to joke how they could sell GM the same part under 3 or 4 different part numbers at 3 and 4 different prices. GM had no clue this was going on and would pay a higher price at Cadillac for the same part they paid little for at Chevy.
The import companies also pressure too but had more room to work in since they were not on the verge of bankruptcy.
As for the UAW it is true that it was cheaper for GM to keep plants open building cars vs. closing them down. This is part of the reason we always has so many rebate programs. GM had to keep cranking the cars out and it was less of a loss to sell the cars cheaper with money on the hood vs. closing the plant down and paying workers to stay home.
This whole ignition is just the perfect storm of GM issues, supplier issues and in many cases driver issues. If anyone of the failed to perform as needed then the worst could result.
Not sure if this will be the final story but it is as good as any we will hear
This goes to show you that OEMs should build their own parts to their own specifications and to their own quality.
Easier said than done to make all the parts that are in todays modern cars. To pay the development cost, production cost and to sell it only to your brand and not the entire industry would drive cost off the board. Note most of these OE suppliers are not making a lot of money and they sell many of these parts to most auto MFG. Now cut that down to just one MFG you would never recoup the scale of cost.
Imagine if GM had to make their own tires or light bulbs not to mention all the other items in a car they selves what it would do to the cost of a car. Hell they are already sharing the cost with Ford on larger items like Transmissions they build them selves now let alone a lot of smaller parts.
If this was the model T plant and it was 1920 you could make your own parts but today the scale of cost in the industry just prohibits any such deals. It is a good idea just one that will not longer work in this industry anymore.
Sure, it’s too expensive which is why only a select few auto makers can pull that off (VW group and GM). Plus at the same time, they could also act as a supplier to other smaller companies. I mean GM did sell their in-house made hydramatic 6-speed to BMW a while ago before they switched to the zf 8-speed.
Sorry it does not work that way in the real world.
Even VW and GM could not do all their own parts as it is just too expensive and that is why neither do it now. Not only do you have to account for the production space and all the machinery that goes with it but the employees and the benefits you would have to pay them.
The other issue is most MFG will not buy from you like AMC once did. Most MFG only like dealing with independent MFG and not the competition. GM spun off Delphi because of the cost involved and GM also found that Delpi was only really doing GM work. Since they were part of GM few other automakers would use them. Spin them off independently and more came on board.
The Transmission deal was a rarity and a sweet deal for GM. BMW does not have the ability to produce large items like transmissions. There are really only two good sources for Automatic Transmission out there. One is ZF and the other is GM. They worked the deal where GM would design and build the tranny for two years for BMW. BMW would pay for the development cost and then GM after 2 years was free to use the design.
The Ford GM deal on transmission is similar as Ford is pretty much paying GM to design the transmissions and GM is sharing the cost. This way they both get it cheaper. This is why you see a 2015 Ford truck at the GM proving grounds.
The supplier market is very much in need and a difficult business to be in. Everyone wants things cheap and it is hard to make a buck but they can’t live without you. If the industry lost GM and Chrysler the whole supplier market may have folded as they need each and every MFG to make money.
Now it is to the point some MFG have to share platforms now such as Alfa with Mazda and BMW and Toyota. Even Honda at some point may have to share as the development cost are so high on platforms lower volume models will have to be leveraged out like 2 seat roadsters and others.