Busy times return for GM distributors
Although relieved by the settled strike, distributors worry GM will squeeze them for productivity gains
By Ken Brack -- Industrial Distribution, 9/1/1998
Flint, Mich.--Distributors breathed a collective sigh of relief when the seven-week General Motors shutdowns ended -- and then began hustling to meet ramped-up production schedules.A settlement of two strikes in late July was quickly followed by shakeups at GM to reduce costs and improve productivity, some of which will affect suppliers in the future. In August, GM's board voted to spin off its auto parts operations, Delphi Automotive Systems, into a separate company, for example. Doing so may allow Delphi to sell more parts to other automakers, raising potential opportunities for distributors.
Many distributors will be watching closely for future labor problems, as well as commitments by GM to improve local plants and further reduce its supplier base. But for now, at least, some distributors say they are busy enough just keeping up with GM's aggressive schedule.
"They're going to work a lot of overtime now, a lot of seven-day weeks," says Donald Robertson, vice president of sales at Hubbard Industrial Supply Co. in Flint. "It will recover quickly, I'm sure."
Robertson expects a torrid pace for the remainder of the year supplying GM plants, which make up three-quarters of Hubbard's customers. "They'll be catching up for lost time and we will be doing the same," Robertson says. "I can't say what the long-term effect will be from the strike."
Clearly, many distributors are relieved. J.H. Bennett and Co., Inc. president Ray Blashill says the strike caused a revenue shortfall of 30 percent and forced the firm to go to a mandatory 32-hour work week to avoid layoffs. Blashill did not anticipate returning to a full staff until mid to late August.
"Very little attention has been paid to the impact on [GM's] supply chain, and it is a very serious impact," he says. "Only 17 percent of our business is direct with GM, but we also had fallout from the tier one production suppliers to GM."
Fastenal had previously announced that the GM strike would cost it $500,00 a month in lost revenues.
However, Doug Ruggles, president of Martin Plant Services, a division of Martin Supply Co. in Sheffield, Ala., says the shutdowns had no net effect on sales. His division handles integrated supply contracts, including a large one with a GM parts plant in Tuscaloosa, Ala., and it supplied scheduled summer maintenance crews there. "We went right on as if the plant were open," he says. "We don't think the discussions of outsourcing will affect us at all."
One distributor that supplies GM's Corvette plant in Bowling Green, Ky. sees clouds forming on the horizon, though. Through August, employees at that plant had worked without a contract for two years. And Randy Lamar, branch manager at Neill-La Vielle, a general line distributor, says he is also concerned about the future of outsourcing, or the likelihood that GM will contract with national integrated suppliers to further reduce its vendors. Neill-La Vielle provides MRO supplies and runs a commodity management program for chemicals, paints and other materials at the plant.
Although the Bowling Green plant was only shutdown for about a month, Lamar expects that will reduce his branch's sales to GM by 29 percent this year. Fortunately, the distributor picked up a variety of other work to more than make up the shortfall. In fact, Lamar expects branch sales will be up about 15 percent by the year's end.
The shutdowns at most of GM's North American assembly operations took a toll on parts suppliers and dampened the economy. A key measure of manufacturing activity in the U.S. fell in July for the second straight month, according to the National Assn. of Purchasing Management's index.
Although they'd much rather be busy than not, Lamar and others expect it won't be easy matching GM's production demands for the rest of the year.
"It's feast or famine," says Gene Sapp, vice president of Tinsley Tool Supply Inc. in Maryville, Tenn. Sapp says he is glad his company does only limited business with a GM supplier, although he does a lot of volume with manufacturers selling to Toyota and Chrysler. "I hate to see it so reliant on automotive," he says.
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