Repairing supplier relations won't be easy, but Vitous has the manual

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There is a meeting room in the vast office space of Stellantis’ North American headquarters to honor the memory of the late Dan Knott: a man who worked tirelessly to successfully restore then-Fiat Chrysler’s relations with its supply base after the disastrous Cerberus era, enabling years of positive change.

Unfortunately, judging by the results of the most recent Plante Moran survey of automaker-supplier working relations, the lessons Knott sought to permanently embed in his employer’s purchasing culture were misplaced, at least temporarily.

Now it’s up to Marlo Vitous, the new purchasing and supply chain chief, to set things right again, and judging from what she told me in 2015, when I interviewed her as one of Automotive News‘ 100 Leading Women in the North American Auto Industry that year, she is the right person for the task.

It is not surprising that Stellantis again finished last among the six largest automakers in this year’s Plante Moran survey, but the depths of how far below other automakers it has fallen is breathtaking.

In the survey period, Stellantis had quietly rewritten purchase order terms and conditions that would shift much of the burden of unexpected events to parts makers while requiring them to share annual cost savings with the automaker. It had done so even after finishing last in the prior year’s Plante Moran survey, and abandoned the alterations only after great outcry across the supply base.

That’s not the kind of behavior you want to see from anyone, let alone your trusted business partner — especially when depressed and inconsistent production schedules have crushed suppliers’ bottom lines.

In the modern auto industry, especially as it has developed in the wake of the Great Recession, suppliers are the beating heart of any automaker: Damage that single muscle, or neglect it, and everything else in the body eventually stops working.

The driving force of innovation across the industry is in the supply base. In a market where continuous technological advancement is the key to sustained brand development and consumer sales, suppliers now wield the outsized power to enable an automaker’s success — or destroy it. That’s why it makes no logical sense for Stellantis or any other automaker to purposely antagonize its suppliers. It is one thing to look for shared efficiencies to benefit from; it is quite another to subjugate a supplier to the status of little more than a servant.

To be sure, Stellantis in its current form is still a very young company, and its abysmal supplier relations may be the temporary, painful side effect of its merger and all of the uncertainties that come with the combining of two of the world’s major automakers. Stellantis did, after all, eventually correct its terms and conditions misstep, giving its suppliers reason to be hopeful.

But let’s be honest: It’s still the successor company to the one that was run by Sergio Marchionne, the guy with a single-digit profit margin and a propensity to be more direct than most automaker CEOs in his coveting of suppliers’ healthy margins in pre-pandemic times.

In August 2014, Marchionne told analysts that he would speak with suppliers “to find a way that we can at least participate in their well-being, and perhaps allow them to rub off some of their newfound wealth onto us.”

The task of rebuilding Stellantis’ supplier relations is not impossible. It’s been done before, but it will take hard work and dedication to the task from both the purchasing and executive teams.

Dan Knott, and before him Tom Stallkamp, successfully rebuilt supplier relations at what is now Stellantis’ North American operations by being open, honest and thoughtful with suppliers after turbulent periods.

For Stellantis to succeed, Vitous will have to study those past experiences and use them as a guidepost to have history repeat itself — again.

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