Vendor Defender comes to Detroit

Over the years, I’ve earned the nickname ‘vendor defender’ for my staunch support of suppliers who are blamed for everything from late deliveries to high prices to poor design. While I never shy away from a good supplier bashing when the situation warrants, I often come to their defense when it way my company that caused their poor performance. It is always easy to blame those not in the room.

So, it is with great personal astonishment that I admit that in many cases I do not feel sorry for the suppliers who are being impacted by the temporary derailment of the US auto industry. I was an advocate for bailouts because of the impact on suppliers. And, I do feel bad that it is the supplier community who will take it on the chin during the current GM and Chrysler bankruptcy proceedings. Short sighted planning, and ignoring the inevitable, have many of them trapped. My compassion has limits, though.

What changed my mind? An article in today’s New York Times about the impact on the supplier community did. The article mentions that up to 500 out of 4000 automobile suppliers could go out of business due to the downturn in the industry. While some of the companies have tried to diversify and find new markets, their efforts were often too far too short and far too late. My question is where have they been doing in the last decade or so while the domestic auto industry was imploding?

Most of my industrial career was in semiconductor capital equipment, an industry with dramatic highs and lows. We were always concerned with the market make-up of our suppliers. A prolonged downturn could kill them and we were sensitive, and selfish, to that fact. We wanted them to remain in business as strong and valuable suppliers to us.

We’d often ask about such concepts of percentage of business and market diversification strategies. Some managed it right and actively sought out business in diverse markets to mitigate the demand swings in the semiconductor and other business segments. One supplier actually went from 100% semiconductor (a captive shop) to one that had just 10% of semiconductor equipment in their portfolio. They actually turn down semiconductor business if the market balance changes. Oh, they are still in business, and flourishing. They might even have a bit of automotive business.

So yes, I feel bad about the automotive suppliers who are in trouble these days. But I bet some will be back to their old ways when the automotive business comes back. Others will have learned their lesson. Me? I guess once a vendor defender always a vendor defender.