Manufacturers Taking A Different Approach to Supplier Relationships

In the old days any of the big automotive manufacturers would always deal with suppliers from a position of power and expect to dictate what, how, and when they wanted their contracts fulfilled. But as the automotive industry has expanded from traditional manufacturing to include globalized supply chains, new technologies, and tangled intellectual property agreements, the balance of power between automakers and suppliers has shifted in favor of global suppliers.

We only have to look at the Chevrolet Bolt to see this new reality in play. While the car itself is getting a ton of attention for its creative design, functionality, and its environmental credibility in the automotive press, one of the more intriguing stories is in the supplier contracts that General Motors signed to build the electric car. General Motors worked with two South Korean companies to help produce key ingredients for the Bolt, including the battery, the electric motor, and powertrain systems. General Motors needed to work with powerful companies that were not its ‘traditional’ supply partners of the past, but international and tech-focused businesses. This proved to be a truly pivotal point for the automotive behemoth. It needed to think differently. It needed to radically alter the way it worked with suppliers if it wanted to get the best partners in a brutal market for cutting-edge technology. And so they did.

General Motors did something no other manufacturer had dared: they let the supplier companies keep all of the intellectual property that went into imagining, designing, and building the new core technologies that would take products like the Bolt to whole new level. This became even more apparent than when the company decided to get into the autonomous vehicle game, and it needed the best and the brightest to be on board and to make that happen GM needed to take a revolutionary approach to working with tech companies and new suppliers and needed to build healthy long-term relationships. GM pointed out that these long-term contracts, which are scheduled to last for at least two product cycles, or about 10 years, will make sure that their partners are fully vested in coming up with continued improvements. In the short-term, they can attract the most ambitious and dedicated partners.

The company now sees these new types of supply contracts as potentially becoming the norm and more far reaching than they had originally envisioned. It will be interesting to see who might follow suit next.