OEMs are increasingly looking into suppliers’ costs, technologies and ability follow-source ahead of bids
GM’s new purchasing programme is one of a growing number of schemes created by manufacturers as a means of fostering co-operation between OEMs and suppliers. The programmes will provide a way for OEMs and suppliers to manage their new technology developments together, as recent years have seen the burden for R&D drift away from OEMs into the hands of suppliers.
GM’s new parts-buying programme, reported last week by Automotive News, is said to forgo conventional supplier bidding and focus more on an analysis of the suppliers' facilities and costs. Suppliers who agree to be part of a new programme, called the One Cost Model, will receive long-term contracts from the automaker for periods ranging up to the life of a vehicle. In return for these lengthy contracts, the automaker will not seek bids from other suppliers.
Under the programme, suppliers looking for business from GM allow a team of the automaker’s engineers and purchasing executives to evaluate its factories and costs data. The evaluation, which GM calls activity-based costing, assesses material costs, labour, scrappage, production cycle times and other costs. GM then meets with the supplier to discuss the evaluation and a potential agreement. If both parties agree on terms, then GM awards the contract to the supplier. The entire process can take up to 20 weeks. The One Cost Model programme further requires suppliers to identify fresh cost-cutting opportunities from time to time. GM will update its cost analysis every year to see if the supplier can reduce costs by using more efficient production, the report adds.
The thinking within the industry is that by locking suppliers into longer-term contracts and getting them involved in the vehicle design process earlier, automakers can expect suppliers to share more technology and better processes that help save money. The US automaker has already started signing long-term contracts with some of its key suppliers.
OEMs are increasingly looking to introduce suppliers into development process and the strategic process at a much earlier stage than they currently do. For OEMs, it’s also a way of trying to change the traditional adversarial relations between manufacturers and their suppliers that, despite periodic improvement, has been a hallmark of the automotive OEM-supplier industry for decades now. The latest way that OEMs are reaching out to suppliers is by creating programs or ‘clubs’ that bring suppliers into the process at an earlier stage. One of the earliest examples has been Ford with its aligned business framework. The idea of the programme is to involve suppliers at an early stage, provide them with access to long-term forecasts and long-term technology roadmaps, while at the same time saying that they have preferential access to Ford’s business. Suppliers that match an OEM's investments in a certain region by following with a plant of their own have a stronger chance of getting business from that OEM in that region.
Being inside these frameworks can be a real advantage to suppliers. Around two-thirds of Ford’s purchasing is made through the 110 suppliers in the aligned business framework. VW has recently initiated a similar programme, FAST (Future Automotive Supply Tracks), that goes in exactly the same direction, trying to include suppliers earlier in the development of the process and making sure that they can leverage the innovation push that comes from the supply base. In return, FAST partners will also contribute their ideas to the pre-series development of vehicles at an earlier stage.
For suppliers on the scheme, it’s an effective way of securing business and undoubtedly a sign that OEMs are increasingly prepared to offer better terms. GM’s Steven Keifer’s previous experience with Delphi means that he is acutely aware of life as a supplier. During the Automotive News World Congress in January, he was quoted as saying, “Having been a supplier, I know how hard it is making money in this industry.”
However, there is still some risk for suppliers.For OEMs these supplier frameworks are a way of mitigating the risk that has been created as the development of crucial new technologies has been handed over to suppliers. By bringing them on board, they can cherry-pick the best new technology and retain a degree of exclusivity on some projects. Because of this, suppliers will have to choose their projects carefully. It’s also a way of spreading the pressure to create new innovations for shorter product development times over a preferential supply base. Suppliers may also find themselves in a situation where competitors are part of the same club, creating some synergies of information access. Suppliers have a right to be cynical about automakers motives, but these developments could mark an improvement in OEM-supplier relationships that might this time be sustained.
Copyright © 2025 S&P Global Inc. All rights reserved.
These materials, including any software, data, processing technology, index data, ratings, credit-related analysis, research, model, software or other application or output described herein, or any part thereof (collectively the “Property”) constitute the proprietary and confidential information of S&P Global Inc its affiliates (each and together “S&P Global”) and/or its third party provider licensors. S&P Global on behalf of itself and its third-party licensors reserves all rights in and to the Property. These materials have been prepared solely for information purposes based upon information generally available to the public and from sources believed to be reliable.
Any copying, reproduction, reverse-engineering, modification, distribution, transmission or disclosure of the Property, in any form or by any means, is strictly prohibited without the prior written consent of S&P Global. The Property shall not be used for any unauthorized or unlawful purposes. S&P Global’s opinions, statements, estimates, projections, quotes and credit-related and other analyses are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security, and there is no obligation on S&P Global to update the foregoing or any other element of the Property. S&P Global may provide index data. Direct investment in an index is not possible. Exposure to an asset class represented by an index is available through investable instruments based on that index. The Property and its composition and content are subject to change without notice.
THE PROPERTY IS PROVIDED ON AN “AS IS” BASIS. NEITHER S&P GLOBAL NOR ANY THIRD PARTY PROVIDERS (TOGETHER, “S&P GLOBAL PARTIES”) MAKE ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE PROPERTY’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE PROPERTY WILL OPERATE IN ANY SOFTWARE OR HARDWARE CONFIGURATION, NOR ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO ITS ACCURACY, AVAILABILITY, COMPLETENESS OR TIMELINESS, OR TO THE RESULTS TO BE OBTAINED FROM THE USE OF THE PROPERTY. S&P GLOBAL PARTIES SHALL NOT IN ANY WAY BE LIABLE TO ANY RECIPIENT FOR ANY INACCURACIES, ERRORS OR OMISSIONS REGARDLESS OF THE CAUSE. Without limiting the foregoing, S&P Global Parties shall have no liability whatsoever to any recipient, whether in contract, in tort (including negligence), under warranty, under statute or otherwise, in respect of any loss or damage suffered by any recipient as a result of or in connection with the Property, or any course of action determined, by it or any third party, whether or not based on or relating to the Property. In no event shall S&P Global be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including without limitation lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Property even if advised of the possibility of such damages. The Property should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions.
The S&P Global logo is a registered trademark of S&P Global, and the trademarks of S&P Global used within this document or materials are protected by international laws. Any other names may be trademarks of their respective owners.
The inclusion of a link to an external website by S&P Global should not be understood to be an endorsement of that website or the website's owners (or their products/services). S&P Global is not responsible for either the content or output of external websites. S&P Global keeps certain activities of its divisions separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain divisions of S&P Global may have information that is not available to other S&P Global divisions. S&P Global has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P Global may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P Global reserves the right to disseminate its opinions and analyses. S&P Global Ratings’ public ratings and analyses are made available on its sites, www.spglobal.com/ratings (free of charge) and www.capitaliq.com (subscription), and may be distributed through other means, including via S&P Global publications and third party redistributors.
