Kirk Kerkorian's proposed shotgun wedding of General Motors Corp. (GM) and Renault-Nissan Motor Co. (NSANY) rests largely on one big premise: that the trio could save billions and race new cars to market by mashing up their engineering and purchasing might. Both sides are now weighing the idea's pros and cons. But before rushing into a deal, Renault-Nissan CEO Carlos Ghosn might want to talk to Bo I. Andersson.
Andersson is GM's purchasing czar. Few have a better understanding of the inefficiencies hobbling the world's No. 1 carmaker. Besides, Andersson is Ghosn's kind of guy. He aims to whack $2 billion from GM's purchasing bill every year indefinitely and ax many of its 3,200 suppliers. Andersson expects results and will go to the mat to get them. A former Swedish Army officer who came up through the ranks of GM Europe, Andersson, 50, is a seriously hands-on individual. He zealously tracks every quality glitch, delay, and snafu on his BlackBerry -- then calls the supplier to find out what's up.
The relentless attention to detail comes with the territory. Andersson buys a staggering $85 billion worth of wheels, axles, seats, bolts, and other parts each year, a purchasing bill that's second only to the U.S. military's. So he has a lot of buying power and has taken GM's hard line with suppliers to a whole new level. "GM's purchasing people know the one way they can get costs down is to be brutal," says a parts executive, who requested anonymity for fear of offending the indomitable Swede.
But if slashing $2 billion a year in parts costs was simply a matter of squeezing suppliers, Andersson would be on easy street by now. His job is a lot more complicated than that. Andersson would like GM vehicles to share more parts, the way Japanese automakers do. That's a hard thing to do at the best of times, let alone at a company of GM's size. Andersson is also fighting his employer's legendary bureaucracy. He often finds himself asking questions like, 'Why do we have two dozen different seat frames?', only to get answers like, 'We've always done it this way.' "Sometimes," Andersson says, "we are our own worst enemy."
When he became General Motors' vice-president of global purchasing in 2001, Andersson inherited a sprawling mess of redundancy. It reminded him of his days in Europe in the '90s, when GM brands Saab and Opel manufactured similar cars within a few hundred miles of each other but engineered them separately and built them from many different parts.
Until 2000, GM's North American operations had completely separate engineering groups for cars and trucks. And within those groups were separate teams for almost every type of vehicle the company made. With each team working independently, the engineers and designers had no idea how much money was being wasted making different versions of the same things. The process is akin to a parent of six cooking six different menus -- chicken and broccoli for Jimmy, steak and peas for Susan, and so on. It didn't make much sense.
And it has led to serious absurdities. Consider the lowly seat frame, the steel latticework that provides support, comfort, and safety as you tool along the highway. GM makes 26 different versions. Toyota Motor Corp. (TM): two. Engineering a seat frame for a new model can cost $20 million. Add it up and GM has a half-billion-dollar handicap vs. Toyota on seat frames alone. There's a similar gap with engines. GM makes a dozen V6s; Toyota and Nissan make do with a few. GM Chairman and Chief Executive G. Richard (Rick) Wagoner Jr., who once had Andersson's job, is stating the obvious when he says: "The opportunities to save are tremendous."
FIGHTING OVER A HINGE
Even before taking the top purchasing job, Andersson was part of company-wide efforts to break down the silos inside GM and get divisions talking to one another about how to share parts and save money. But he continues to struggle against hard realities. Simplifying or making one part work for a bunch of models isn't simply a matter of designing and producing it. GM usually needs to wait for a new car launch before making big changes to the underlying parts. Why? Because suppliers are already geared up to build hardware for existing models and would require millions in up-front payments to retool their factories. So GM can move only so fast.
A couple of years ago, Andersson discovered that door hinges on big SUVs and trucks could be made out of three pieces instead of five. Doing it that way would save $21 a truck, or about $100 million over several years. A no-brainer, right? Except that building a new hinge involves months of testing, which includes programming a robot to slam a door a few hundred thousand times. That itself costs plenty of money, so the engineers wanted to make sure it was worth it.
Eventually Andersson prevailed, in part by pointing out that a rival uses a similar hinge for most of its trucks. Still, the debate went on for three months at a company where time is not exactly a luxury. Says Terry Woychowski, chief engineer for big trucks: "Don't underestimate the fight you can have over a hinge."
Andersson still has plenty of work ahead cutting through the clutter inside GM, but he has made quick work of weeding out weak suppliers. In part, he is using the consolidation roiling the industry to dump them. But GM has a reputation for particularly aggressive tactics. Andersson is cracking down on the most egregious of these, but GM continues to rank dead last in an anuual supplier satisfaction survey. "It's a brutal process," says David E. Cole, who runs the Center for Automotive Research in Ann Arbor. "There are bodies laying by the side of the road."
Suppliers point to one particularly nasty tactic: shopping their technology out the back door to see if rivals can make it cheaper. In one case, a GM purchasing manager showed a supplier's new brake design to Delphi Corp. (DPHIQ) Andersson let the guy go. But in a recent survey from Detroit research firm The Planning Edge, parts executives said they tend to bring hot new technology to other carmakers first. Yet another reason GM finds it hard to compete.
Andersson hasn't much sympathy for weaker suppliers. He figures many of their problems -- high costs, massive debt, unproductive plants -- are self-inflicted, just as they are at GM. But if they won't match his standards, he has no compunction about yanking the business, even if doing so forces the supplier into Chapter 11. That's what happened to Dayton (Ohio)-based wheel maker Amcast Industrial Corp. The company had just emerged from bankrupcty protection last year when it immediately demanded a steep price hike for its wheels. GM refused and Amcast was back in Chapter 11.
Naturally, Andersson sees outsourcing to low-wage redoubts or inviting foreign companies to set up shop in the U.S. as fair play. One recent Friday morning, he held the weekly "knock meeting," a ritual where purchasers approve parts buys. The buyer approaches Andersson and his team much like vassals appealing to their lords and masters in a medieval star chamber. When managers approve of a pitch, they knock loudly on the table. So it went with a proposal to save $30 per car by sourcing door panels for all of GM's midsize models from China. Lately, the China angle has prompted a lot of knocking. Andersson has boosted GM's Chinese parts bill by 60%, to almost $3 billion, since 2003.
That doesn't make him popular, but Andersson is unrepentant. "If I am successful," he says, "in five years people will think I'm a hero." Sounds like Carlos Ghosn, doesn't he?
By David Welch