General Motors makes progress in supplier relationships
GM moves to weekly supplier payments, returns some supplier bailout funds
Dave Hannon -- Purchasing, 11/25/2009 11:18:04 AM
Since emerging from bankruptcy, General Motors is reportedly making significant progress in its efforts to stabilize its supplier base and avoid major government debt.
Earlier this month, GM announced it began paying direct materials suppliers weekly instead of monthly in an effort to help struggling suppliers' cash flow and keep their doors open. A GM spokesperson tells Purchasing.com that average payment time is 47 days from invoice submission. More than 96% of North American suppliers signed up for this program, the spokesperson said.
GM also said it would be revising its supplier cost reduction suggestion program to let suppliers keep a larger share of savings generated from cost reduction ideas that are implemented.
And this week GM said its improved cash flow and supplier payments have gone so well that it is returning $140 million of the $290 million in supplier payment funds GM was loaned from the government's massive $5 billion automotive supplier bailout package. The reason? Suppliers were not drawing on it because they would rather get their money from GM than the government, says a GM spokesperson.
"Our estimate is that $150 million from this 'line of credit' is sufficient to cover suppliers who need quick cash payments going forward," a GM spokesperson tells Purchasing.com. "The other money is still there if something changes."
At its peak, GM's Supplier Support Program invovled 375 suppliers, but only about 70 are still involved.
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