It’s hard to imagine one small, family-owned Massachusetts business bringing down one of the world’s largest automakers. But, it nearly happened, as Automotive News tells.
Clark-Cutler-McDermott Co. of Franklin, Mass. has been GM’s only supplier for acoustic interior pieces and other various trims. Suddenly, the supplier filed for bankruptcy, sending its employees home. Adhering to the just-in-time supply chain, GM had no stockpile of parts. North American production was predicted to come to a halt.
GM obtained a court order for CCM to continue operating, which was successful in keeping production humming along, while both sides worked a deal. On Wednesday, July 13, GM had successfully gained access to CCM’s tooling during an emergency court hearing. Production has since continued, with no disruptions in the foreseeable future.
While it isn’t an ideal situation, GM is now responsible for moving and transferring the tooling, it was the only option as CCM seeks out a buyer for its belly-up business.
Comments
I wonder if this is in any way similar to how the DuPonts took over from Durant….
This is a fraction of the story and incredibly
biased. We and a number of other businesses supplied the millions of pounds of material that make these parts and we are all being forced into bankruptcy. This was no surprise for GM. They were on site the entire time, had KPMG on site, funded operations at a loss while refusing to pay suppliers. Read the documents. They are all public.
Dan’s statement is accurate but this isn’t on GM alone. Having worked for a former supplier to GM and others, everyone submits a Request for Quotation. Egos and the will to win sometimes cloud judgement. Companies take business at a loss or at little profit because “we’ll make it up elsewhere”. High profit parts go away for one reason or another and all of the sudden your left with low margin contracts with no chance of securing lending to prop the business back up even if you could cut costs. Most OEs will give you enough rope to hang yourself then walk away with the tooling since they own it. It’s a gamble on their part but what did they have to lose if they go with another manufacturer? The difference they pay to go elsewhere is minimal as long as other manufacturers have capacity. When GM and KPMG come in, they are protecting their supply chain and know exactly what it takes to get the part built. They eventually pull all their business and the part manufacturer can’t find a buyer. There is no business case for low margin and loss of business unless someone is just buying plant capacity and that will not happen based on the distance from auto manufacturing plants. It’s a crappy deal when hard working people (including myself) are caught in the Middle of this BS. In time the pain goes away when we realize “we can’t fix stupid”.
If you dance with the 800 lb gorilla long enough he will eventually tramp on you!
Dan
I feel for you but it is incumbent upon you and any suppliers to know the financial situation of your customer. The end user bears no responsibility to see that the suppliers of his supplier are made whole.
With that being said, shame on GM purchasing to getting into a situation where the had only one supplier for a component. Would not have felt sorry for them if production ground to a halt!
At my workplace we always try to make sure our suppliers are profitable. Not our problem… but if they do the job good in good time, we try to keep them going. It’s hard to find someone new that knows how you like your parts. We pay are invoices I’m told faster than anyone, and in reward our jobs are always pushed ahead of the rest. It’s really important to keep suppliers happy.
This is the inherent flaw of just in time deliveries and pressing suppliers for better prices.
Large companies press for lower prices and if it is a well run supplier it often is not a problem as they will not bid over their head. If it is a desperate or poorly run one they will take the job and hope to figure it out later.
GM had it good on supplies when they made their own parts but the cost was high. Today they have a price advantage with this system but they can be at the mercy of who ever the supplier is.
We see it in our company as we demand prices for product and if they relieved we can sell most of what they make. But if they under price and fail we have to come in to bail them out if they are important if not they just fade away.
I can say I have seen some really high profile companies get bailed out several times over the years in the auto parts industry. If we had not bought up inventory or loaned money they would have vanished.
Now when I say run poorly it can be just really bad management but to be fair too many industries are run on very tight margins now too where a small mistake can be deadly to a company.