GM climbs down over new contract with suppliers

For many years, the automotive industry was seen as a leading sector for procurement performance and leadership, with Ford one of the key organisations that seeded other sectors with skilled and well trained procurement executives. However, individual firms have had their share of procurement ups and downs over the years, and General Motors is the last to get some less than good headlines because of supply chain activities.

Grace Leiblein became CPO last year. She had previously worked as President of Operations in Brazil and Mexico for GM, but does not appear to have had deep procurement experience. Six months into her new job, she introduced a new set of terms and conditions for GM suppliers. These didn’t go down very well – suppliers were asked to accept liability for future problems with parts, even if they had supplied them to GM’s exact specifications. And GM wanted rights to communicate suppliers’ IP (unless a separate agreement was formed).

This, not surprisingly, did not go down well with suppliers, who according to industry surveys already rated their relationship with GM as weaker than with many of GM's competitors.

So as Automotive News reported last week, Lieblein “revealed that the company is eliminating controversial portions of the company's standard contract, introduced just six months ago, that had outraged suppliers and was seen as an effort to exert unprecedented control over vendors. It "was a misstep for sure," Lieblein said. "I don't want to be talking to CEOs about terms and conditions. I want to be talking to them about technology and quality and driving waste from the system."

That’s a big climb down for the company. And we will look at some of the supply chain factors that contributed to that in part 2. But it also raises interesting questions about the skills needed by a CPO. In some senses, it supports the CIPS  idea of a Licence to Practice, backed by legislation. Presumably it would have been illegal for GM to point Lieblein under the CIPS regime? (Which seems a far fetched position when you put it like that, to be honest).

But would it have come to that? Would CIPS actually have denied her a Licence to Practise, and risk perhaps losing some valuable GM training or certification business? Or would they be pragmatic, and say, OK, you’re clearly in a top role, you must ‘deserve’ that Licence. Then feel pretty silly when things started going wrong and her lack of procurement experience was show to matter after all.

And I do have some sympathy for her. Where were the experienced procurement and supplier relations people in GM, saying, no, this won’t work, think again? Or is there a culture of unswerving obedience to the top person – I don’t know enough about the GM style to comment, but another interesting point.

In part 2 we’ll look at why suppliers have this power in the automotive industry, and what it tells us in terms of other organisations and markets.

 

Voices (2)

  1. Secret Squirrel:

    “Would CIPS actually have denied her a Licence to Practise, and risk perhaps losing some valuable GM training or certification business?”

    No, they would have awarded her a fellowship like Crothers got…….

  2. b+t:

    What pat of the CIPS syllabus would have stopped a ‘qualified’ CPO from making this mistake?

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