A minor miracle has occurred in the auto industry that can't pass without comment. Automotive suppliers faced with yet another demand for price cuts from one of the auto giants just said "no." Amazing.
DaimlerChrysler A.G., wallowing in red ink, ordering six plants closed and 26,000 employees cut, turned to its favorite whipping boy, its 900 suppliers, and ordered a 5-percent price reduction on all that it buys. Fully 70 percent of DaimlerChrysler's 100 largest suppliers, including rubber components makers, rejected the demand.
The auto maker used the carrot and stick approach: Give in, we'll reward you with future business; fight us, we'll replace you. That's how all of the auto companies, not just DaimlerChrysler, deal with their suppliers. Talk about "partnership" is just that—talk. Automotive suppliers are merely junior partners expected to do as they're told, and take whatever they're given (or have to give back). That's the price if you want a high-volume customer.
No one wants DaimlerChrysler to pull itself out of the morass it has sunken into more than its suppliers. They need DaimlerChrysler's business. And they have a history of being pushovers when it comes to auto makers' demands. Already, some suppliers are negotiating for smaller price cuts.
Circumstances spawned the revolt. The automotive market is slumping, high oil prices are causing raw material costs to rise, and other auto companies certainly will demand whatever concessions DaimlerChrysler gets. If a supplier rolls over, it, too, could find itself in a bad fix.
DaimlerChrysler still expects to get its pound of flesh in the long run. If fairness was a doctrine the company understood, it would back off from its demands, or at least make them more reasonable. Don't expect that to happen.