Andersson, Brown and Rosenfeld. Sounds like a high-powered law firm specializing in product liability. Bo Andersson, Tony (Thomas) Brown and Peter Rosenfeld know plenty about liability, but it's not because they're lawyers.
No, this power trio wields a different type of influence in Detroit — the kind that makes or breaks automotive suppliers. As top-level purchasing executives, Andersson (General Motors Corp.), Brown (Ford Motor Co.) and Rosenfeld (DaimlerChrysler Corp.) are the people who no right-minded supplier can afford to cross. Collectively, they control a budget fast approaching $300 billion a year — nearly on par with U.S. national security spending.
Ward's interviewed all three separately last month. In their edited remarks below, Brown says suppliers are not solely to blame for Ford's quality problems, and Rosenfeld explains why DC has re-sourced $4.3 billion from struggling suppliers. Andersson says newly acquired portions of Korea's Daewoo Motor Co. Ltd. will have a place in GM's global purchasing strategy.
All three executives have ascended to their current posts within the past year. At GM, Andersson replaced the retiring Harold Kutner as vice president for Worldwide Purchasing, Production Control and Logistics in December. A month later at Ford, Brown became vice president of Global Purchasing, reporting to Group Vice President Carlos Mazzorin. Brown's new boss will be David Thursfield as of Aug. 1. At DaimlerChrysler, Rosenfeld has been vice president of Worldwide Procurement and Sourcing Strategy for little more than a year, reporting to Executive Vice President Thomas Sidlik.
All three are responsible for daily purchasing activities on a global basis. For Andersson, that means also overseeing procurement for GM partners (Fiat, Subaru, Isuzu, Suzuki and, soon, Daewoo). For Brown, that means Jaguar, Volvo, Land Rover and Aston Martin (not Mazda). Rosenfeld's oversight includes purchasing duties for some Mercedes-Benz components but not Mitsubishi or Hyundai.
Q — What is your vision for Ford purchasing?
A — In its simplest form, it is to be the customer of choice for our suppliers. There are a few large suppliers that have a significant responsibility for the success or failure of all of the OEs. When those (supplier) CEOs are deciding what technology they're going to bring where, if Ford is not the customer of choice — let's say one of my competitors is — when they make that choice, I'm at a competitive disadvantage. I end up getting technology second, third or fourth, which is problematic.
Q — How do you become the customer of choice?
A — It's a long journey. When we have a conversation with one another, we're trying to figure out a way to solve the interest of the ultimate customer. And in that process, not only will the customer benefit, but Ford and the suppliers will benefit. Because, ultimately, if the suppliers don't have a business model that works for them, then it's not sustainable.
Q — A lot of suppliers describe Ford purchasing as heavy-handed. How do you size up your supplier relationships?
A — Better, but still room for improvement. There are clearly things we can do to make our relationships better. One thing you hear is, “Well, you don't know if you really have the business or not because they change suppliers a lot.” No we don't. Look at who we were doing business with 10 years ago and who we're doing business with today. There's not a lot of turnover.
Q — Have all the suppliers met the requirements of Ford's “Back to Basics” quality program, launched in February?
A — Not all. And if we can't get those suppliers fixed, then we will develop an exit strategy from those particular suppliers.
Q — There was a recent story about your meeting with suppliers with regard to quality. Are suppliers to blame for Ford's quality problems?
A — I never said that, for the record. No, suppliers are not exclusively to blame. I am disappointed that trust was violated, but more importantly that someone actually believed that was the message given, because it could have been nothing farther from what actually took place in that meeting. We talked about our performance, we talked about our collective success and things we needed to do as an organization.
Some were things they need to fix and some were things we need to fix. If someone walked away interpreting that Tony Brown was blaming suppliers, not true. I'm disappointed if someone heard that message because it means the communications weren't as clear as they needed to be. We've got to make certain we're effectively working with suppliers to make sure we bridge the gap from a quality standpoint. We're better than we were, and we'll be better if we have this conversation a year from now.
by the numbers
- $90 billion (excluding Mazda)
- 10,000 suppliers, including 2,000 direct production suppliers
Q — What is the single most important issue to you? Is it cost, or quality? Don't tell me both of them go hand in hand.
A — I know you'd love to have one answer, but that's like asking a juggler which one of the balls in the air is the most important. In a high tech arena, technology may carry more weight than even cost. If all of the suppliers are equally competitive on cost, frankly that becomes a lesser criteria for differentiation among the competition than, say, delivery does.
Q — What do you say to a supplier that says, “I can't increase the quality on this part or do what you want unless I get an increase in price”?
A — I listen to the supplier and I ask why. And we try to understand the situation, and then we look at where we stand with competitors. If the other competitors in that arena aren't asking for relief and are performing equal to or better than the supplier asking for relief, I say “Your competition isn't doing it, I'm sorry.”
Q — Last year, Tom Sidlik said he wants all Chrysler suppliers to be “A” students with regard to quality, delivery, etc. Do you now have enough “A” students, or do you still have some flunkies?
A — We grade on a curve. If there's two suppliers in a given field, one will be an “A,” one will be a “B.” Do we have suppliers that are “flunkies?” Yes. I think Tom said last year we resourced about $2 billion to $3 billion. We're now at about $4.3 billion of movement of business to “A” students.
Q — We're hearing about de-contenting — taking some content off the vehicle to make it less expensive. For instance, GM is making ABS optional on a number of vehicles. Will we see de-contenting at Chrysler Group?
A — We are not intending to remove components that the consumer will say, “Gee, you've cheapened up this vehicle.” I wouldn't focus on the word de-contenting. We're sort of re-contenting. Among our five product teams, we're looking at places to re-content. Where does it make sense to have similar or the same components where before we may have had five different ones. The result is, the consumer has the same functionality as before, but the cost of the vehicle, in fact, goes down.
by the numbers
- $85 billion (excluding Mitsubishi and Hyundai)
- 10,000 suppliers, including 900 Tier 1s
- $4.3 billion resourced to top-performing suppliers since 2000
Q — GM has an aggressive launch schedule coming up — a new product every three weeks for the next three years. Can your suppliers keep up?
A — They must. It requires us and me to spend a lot of time on it, because we know there is risk.
Q — You're tracking a 50% improvement rate this year for PPMs (defective parts per million) — that's for supplier parts coming to the GM plants?
A — Yes. In actual numbers, we are sitting at 86. The best of the best are trading around at 100 PPMs. Two years ago we were at 400, and what manufacturing has said is that sitting on a rate of 100 PPM or 86 PPM, that's not a big issue. The big issue is really the spills. And so for me, one a week is not acceptable, because it's one too many. The other thing we measure is how many vehicles were impacted. Two years ago it was typically that a lot was maybe 500 vehicles impacted in a spill. Now we typically see it is 50 vehicles.
Q — GM has attempted to de-content some vehicles to reduce material cost. How was ABS chosen as a feature that could be optional, instead of standard?
A — To be competitive in small cars, we see that our competitors do not have ABS as standard. We have looked on parity with all of our competitors and said “What is the competitive offering, and what do we need to do?” If you take Toyota — a $27,000 vehicle that doesn't have electrical seats. It has manual seats, and that was the whole driving point for this.
Q — How's your strategy going for outsourcing interiors to suppliers?
A — It's clear that Lear, Johnson Controls and Magna have been doing a better job than the rest. And then we said the ones that are doing better have more luck, so why don't we give them more.
Q — Why is Visteon no longer part of this interior strategy?
A — Visteon Corp. is a very good supplier to us. We just felt that we didn't need that many interior integrators. This doesn't mean we have conflicts on the working relationship.
Q — What happened with Michelin in Europe? Can they no longer afford to sell tires to GM?
A — Michelin is a very important supplier to GM, and they are our third-largest supplier. My view is in Europe they had a big portion of the business on mainly the low-end vehicles, and they could not meet the target cost we needed to have. We had a competitor who could do most of the business, so it went to Continental. I think it's a rather mutual decision (for Michelin) to exit the business in Europe.
Q — How much attention do you give to how your suppliers are doing financially? Each quarter are you watching the results to see if any new companies have filed for bankruptcy?
A — If you take 3,300 suppliers (to GM), there are less than 20 that have filed for bankruptcy worldwide.
The main portion of this is in the U.S., and being a European guy, some of these you can really question. Some of these (bankruptcies) scare me but some of them don't scare me because it's more or less a tactical thing. Is it good? No. It means the supplier can say they would like to give you savings and productivity but they cannot. Are all the suppliers bankrupt? No. We had the situation with Valeo in Rochester (NY, a former GM parts plant expected to emerge from Chapter 11 later this year). It's clearly in our best interest to support them in all ways we can.
General Motors Purchasing
by the numbers
- $100 billion, including partners Fiat, Suzuki, Isuzu, Subaru
- 3,300 suppliers, including 2,000 in North America
- Material cost savings: 2.2% in 2001, 3.5% forecasted for 2002
For complete transcripts of the purchasing interviews, see www.wardsauto.com