Although the industry is and continues to be one that is damnedly difficult, it isn’t necessarily one that is impossible to compete and win in. Recently, Bo Andersson, group vice president, Global Purchasing and Supply Chain, General Motors, talked about a situation that he’d been concerned with some three years ago. Given the strengthening Canadian dollar, he’d thought that Canadian suppliers might become uncompetitive. But he said that several of the supplier companies worked with their unions. They worked with the government. They worked to improve their overall productivity by doing things like adding automation. “They had some challenges. They acted on it,” Andersson stated with some emphasis on the word acted. It sounds simple. It isn’t. But it is absolutely necessary for those who want to compete: actions are essential.
Another issue that Andersson addressed is that of companies based in the U.S. that are moving their production operations to offshore sites, as though doing the work in the U.S. is untenable. “The fundamental problem is not being in the U.S.,” Andersson stated. He added: “The fundamental problem is being in the U.S. and not being competitive.” He explained that it may be necessary to do things differently—like running a three-shift operation rather than just one or two, or sourcing components from elsewhere. “Just being in the U.S. is not the issue. We have a lot of suppliers based in the U.S. that are doing very well.” Yes, including those with union representation. How do they do it? “They have adapted their business models to the market. To be in this market you need to be very effective. You need to be productive and to use your capacity every day. Running with 55% capacity utilization is to be going out of business, wherever you are.”
Can small and midsize companies continue to exist in what seems to be an ever-globalizing industry? Andersson thinks so. In fact, he thinks that an advantage of some of these smaller organizations is that they tend to concentrate on just one or two things and, consequently, they do them exceedingly well. As a hypothetical, he posited a supplier of forgings based in Flint, Michigan. He suggested that if that supplier was provided components for GM’s heavy-duty trucks, that would be a perfect fit. But if the same supplier trying to compete for work on the new compact car architecture, where there are some 1.6-million units involved on a worldwide basis, then that’s not a good fit. It is a matter of focus and appropriateness. Size doesn’t matter. Meeting the needs and objectives of the customer does.
Andersson observed: “To be competitive in today’s industry, you need to be the best at what you do.” He said that they’ve found, based on an analysis of winners of the corporation’s Supplier of the Year awards, companies that do one or two things tend to do exceedingly well. “To do 10 different things—then it’s hard to be competitive.”—GSV