US suppliers are angry that General Motors is expanding a controversial purchasing program that pressures them to make cash payments to the company in return for future contracts.
The so-called Current Savings program seeks discounts in addition to the annual productivity price cuts that vendors already provide.
Generally, suppliers offer to cut future component prices by investing in new technology or new tooling to reduce manufacturing costs. Now, GM is asking its US suppliers to immediately apply future cost-cutting plans to current programs.
The practice has not yet spread to Europe.
A top-level source within Magna Europe said it does not happen, and a senior source in Opel's purchasing department said he would not ask for advance payments on forthcoming innovations.
European suppliers do make cash payments to GM when GM purchases more parts than originally agreed from the supplier. These cash bonuses are fixed in contracts and paid yearly.
GM in the USA developed the Current Savings concept two years ago and expanded it this year, said company spokesman Dan Jankowski.
Suppliers can offer discounts without having to pay cash, Jank-owski said. For example, vendors might reduce their warranty costs, or they might simply reduce their current component prices.
But suppliers say the discounts often take the form of cash payments to GM, and have ranged from $500,000 to $20 million or more.
'Everything is negotiable,' a supplier said. 'They like the cash.'
Jankowski disputed a supplier's assertion that GM typically demands a 5 percent discount, then allows suppliers to negotiate a lesser amount.
'We are not asking suppliers to slash away,''Jankowski said. 'Each situation is handled on a case-by-case basis.'
Vendors say it is not realistic for GM to expect instant price cuts for innovations still under development.
Moreover, suppliers claim GM sometimes withholds approval of future contracts until the vendor agrees to pay an immediate discount.
'It's part of every major deal they are negotiating,' said a supplier who asked not to be named. 'It's like blood money.'
Some US suppliers have resisted GM's demands for discounts.
'There have been cases where we decided not to do it, and we still got the business,' one executive said.
'We see it as a last-minute deal. GM gets the hook in your mouth, and then they see if they can pull a little more out of you.'