Could a Merged GM Squeeze Out Additional Spend Management Savings?

I'm probably the zillionth blogger to comment on the proposed GM / Nissan alliance. But this analysis to come out of European Procurement Leaders and CSFB is certainly worthy of mention. According to the study, CSFB estimates that Nissan and Renault have already "saved $868 million" from joint procurement activities. The implication is obviously that GM could benefit from related joint activities as well. Earlier in the year, Spend Matters offered five sound pieces of Spend Management advice for GM much of which would be relevant in a merger situation. You can also read Tim Minahan's take over at Supply Excellence. In his post, Tim hits at some of the challenges a new entity might face, one of which is image. I agree that "GM's image problem with suppliers" is a huge challenge. In his post, Tim chronicles how he has "watched (often in horror) as the automaker has burned bridges with suppliers, rebuilt them, and then torched them again. Supply management veterans are familiar with the now infamous tactics of Jose Ignacio Lopez who, while at GM, tried to take a short-cut to cost improvements by tearing up existing supplier contracts and demanding 20% price discounts ... To this day, many suppliers still view GM as the automaker they love to hate."

As a former victim of GM's supplier bashing at FreeMarkets, I will never forget how we helped GM to identify hundreds of millions of dollars in savings -- not just from reverse auctions but through rationalization and other efforts as well -- and then Harold Kutner had the nerve to confront our co-founders and demand equity, lest they "fire-us" and kill our stock price. Yes, they told us this on the record. FreeMarkets declined to acquiesce to GM's typical supplier bashing demand, and the rest is history. Weeks later, GM announced Covisint and allocated hundreds of millions to consultants to figure out a business model for them (which they never quite did, though they were happy to take the money). Four years later, however, FreeMarkets got the last laugh by acquiring some of the scraps from GM's failed marketplace effort.

Jason Busch

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