Though Chrysler gets special attention from us for its supplier-gouging, the practice of sticking parts makers with cost increases is basically an industry standard. As further evidenced by a Bloomberg report that bankrupt supplier BHM is filing to be released from an unfair (it claims) contract with ToMoCo subsidiary Toyota Boshoku. BHM sells vehicle seat-frame components to Toyota Boshoku, which has refused to increase payments in line with an 80 percent rise in steel costs this year. “The supply contract is so unprofitable that the debtors’ continued performance on the current terms cannot be justified,” says BHM in its bankruptcy court filing. The firm had requested a new pricing schedule in June, which Toyota Boshoku has rejected. Interestingly, Boshoku may be facing pricing pressure of its own. BHM components go into vehicle seat frames that Toyota Boshoku manufactures for Chevrolet’s HHR hatchback. GM has not commented on the case, but the facts prove two imutable truths about the industry. First, that everything and everyone in the biz is connected, and second that every OEM would just as soon see suppliers go under as raise their own costs. Be they Chrysler, GM or Toyota.
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The taxi roof light caught my eye in that pic.
So maybe now it would become more apparent why it’s paramount that GM stay viable in North America.
“As goes GM, so goes America.”
This statement should be obvious,(to even Stevie Wonder), that the automotive business is truly global.
Monkey, I am still unenlightened.
This is bad contract writing. Shoulda had a variable price clause to hedge against spikes in important commodities.
Great idea! Like an A.R.M?
Should revolutionize the industry!
Oh wait. That idea has been taken.
@monkeyboy:
Businesses go in cycles. Companies that are not profitable should go out of business.
The Detroit 3 have way too much capacity and have not invested well for the future so they must go.
My job (automotive supplier to Detroit 3) and your job are NOT valid reasons for propping up failing companies. In fact, you and I need to be “freed” from these failing businesses so that we can add value to the market as whole. If we stay where we are, we are not able to add value to the overall market thanks to the value destruction of the Detroit 3 management.
Or, if that didn’t make any sense, NO BAILOUTS!
Not much value to be added when there’s a glut of unemployed workers.
monkey,
The idea may have been taken, but not by these bozos. If you agree to a contract, and then can’t fulfill it, you may have to go bankrupt to get out of it. Nothing new there.
What surprises me is that someone was stupid enough to capitalize a business that would agree to terms like these without an out or a hedge of any kind.
What I want to know is how the folks running the vendor could be so stupid as to get into this contract without any protection against a rise in a basic commodity. I would be happy to turn a lawyer loose on the CEO if I owned part of the company.
Some companies are run by morons and many lawyers are also stupid. Still, Toyota’s CEO (back when he was appointed) stated that his goal was to slash supplier costs by something like $7 Billion.
My best friend is an engineer at GM and he said that in testing of new Toyota products they are seeing crap they have never seen before. For example, the hardware on the new Tundra has been rusting at incredible rates.
I’ve seen it in their interiors, but according to my friend (and the plummeting CR reliability scores), Toyota has cheaped out too far.
“This statement should be obvious,(to even Stevie Wonder),”
Stevie Wonder is blind…not deaf. He can comprehend just fine.