General Motors has maneuvered what could have been a major hurdle in its supply chain. Yesterday, it was reported GM was on the brink of shutting down each of its North American assembly plants due to Clark-Cutler-McDermott’s chapter 11 bankruptcy filing.
GM relies on C-C-M for acoustic and interior pieces for every single vehicle manufactured in North America, meaning without the supplies, vehicle production would have come to a stand still. GM and C-C-M have settled during a court hearing, awarding the automaker the company’s tooling and equipment to find an alternative source, according to The Detroit Free Press.
While the tooling and equipment has been settled, the administrative costs to be paid by GM have yet to be decided.
“We don’t anticipate any disruptions in our supply chain,” said GM spokesman Nick Richards. “We’ll take possession of the tooling, and we’ll have the right to purchase any finished goods C-C-M has in inventory. We have identified other partners in our supply chain who can pick up this production.”
C-C-M claimed, despite being awarded “Supplier of the Year” by GM, the automaker’s pressure to lower prices through cheap contracts resulted in a loss of up to $30,000 per day it operated. The company was originally planned to sell its assets off, but that decision will be up to GM now.
“GM does not agree that the cause of this company’s bankruptcy filing was the GM contracts,” Andrew Troop, a New York attorney representing GM, said. “Rather than its operational inefficiencies and management decisions. We will terminate the agreement once we get our tooling and finished goods inventory.”
C-C-M employees will be paid for done through July 7. It also is seeking court approval to use about $1.9 million of cash held when it filed to meet obligations to employees and pay vendors.
Comments
If CCM was truly working at a loss due to below-cost contracts, no wonder they got the Supplier of the Year award.
Whatever it takes to get that extra percentage point in profit. Good ol capitalism
Ah yes GM is back scalping suppliers again. I thought they learned their lesson last time this happened. GM is really a bunch of crooks. They expect you to slash your prices to hardly making a profit, yet they pay invoices 90-120 days. I hope GM gets burned for doing this to suppliers!
Forgive me if I am wrong, but suppliers have the choice to enter into contracts with OEMS. The only thing that “forces” the supplier to enter into a bad or low profit contract is their management or bad decision making by individuals within the company. Of course GM (or other OEM) will try and put significant pressure on prices. It is the buyer’s job to get the best value, with price often playing one of the dominate roles in value. I can tell you from experience that an OEM will not always go to the lowest bidder, but to the bid that makes the most sense for the company. Pushing off paying invoices for as long as they contractually can makes sense as well as it provides an interest free loan. If a supplier cannot handle these terms, they should choose not to accept them, bid where they are willing to go, and let GM (or other OEM) go to another supplier. Accepting contracts that are unprofitable is a supplier’s fault. I am not saying GM (or other OEM) has not done shady business before, but saying they should burn for being good negotiators does not make much sense.