GM plan to split savings will calm supplier relations

3 September 2009

4 September 2009 | Allie Anderson

A "unique" scheme launched by General Motors (GM) to split cost savings evenly with vendors will transform strained supplier relations, industry experts predict.

The US carmaker last week promised to share half of its savings with vendors that submit successful ideas on cutting the cost of car parts. Previously, GM kept "a significant percentage" of savings in the first year of a contract and all thereafter.

John Henke, president of Planning Perspectives, which conducts an annual survey of supply relationship management in the automotive sector, said that when vendors make cost-saving suggestions, they may get some share in the first year and significantly less in the second. After that, savings only benefit the customer. The extent of what will be shared at GM is, therefore, unusual.

He told SM: "GM is setting a very high bar for other manufacturers.

"As word gets out, this will change things dramatically in other industries as well."

Chris Hibbs, UK automotive leader at PricewaterhouseCoopers, said: "If GM delivers it will be very positive for supplier relations. I would expect to see it rolled out in other industries in five to 10 years' time."

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