Can Anyone Explain To GM or Ford Management That The Purchase Price Is Only A Dwindling Part Of The Cost Of An OEM Automotive Part ?

Implications: Quality, on time delivery, and price used to be the three factors to be judged, and in that order of descending importance, by OEM automotive buyers. Then the accountants took over and simply dismissed those with engineering and materials evaluation skills as commodities whose opinions and recommendations were of little value. In doing so they destroyed the American OEM automotive industry's ability to compete, probably permanently.

Analysis: General Motors has a real problem with the corporate decline caused by its short sighted executive and purchasing management. The cure may be worse than the disease.

If GM's board should suddenly get out from under the thumb of current CEO, Rick wagoner, who has led the company to utter financial disaster-GM's market cap is now under 10 billion dollars, it has lost more than 50 billion dollars in the last 5 years, and it has wasted billions on a marginal plug-in hybrid that it is finding too expensive to build-it may face an even worse disaster. The senior corporate executive after Wagoner is global purchasing manager, Bo Andersson, whose policy of moving 30% of GM's purchasing 'spend' to Chinese producers without any way of determining whether they could do the job is now backfiring as the consequences of ignoring any 'metric' other than price blow up in his face. The Chinese currency is rising in value against the US dollar; 16% in the last year, raw material costs are skyrocketing; steel alone is up nearly 50% in the last three years, Chinese labor costs are rising rapidly, and recalls due to Chinese quality failures are costing GM billions.

The cost of teaching the Chinese how to mass produce high quality OEM auto parts has been astronomical and it is the American consumer who has paid the bill.

GM contributed mightily with its short sighted policies of squeezing its supply base and forcing it to compete with a fraudulent China price to the decline of the OEM American auto parts industry. Now that industry is dominated by foreign owned 'transplant' suppliers whose interlocking relationships with OEM automotive transplant assemblers leaves them little interest in or capacity for supplying slow paying GM, Ford, and Chrysler.

It never seems to have dawned on Rick Wagoner or Bo Andersson that while they were shifting production and parts manufacturing to China the profitable OEM car makers were building plants and bringing their suppliers to North America to take advantage of what GM was abandoning, quality, on time delivery, and a competitive price.

The only hope that GM, Ford, and Chrysler have of staying independent is to reduce the size of their cars and replace all of their top management. Until they do both they will neither make a profit nor a car that anyone wants to or will purchase.