In a rather shocking story that came out late last week, Johnson Controls, the interiors and seating system Tier 1 automotive supplier, sued four suppliers for levying steel surcharges on them, alleging the suppliers had violated their purchasing contract. The story is rather shocking not because automotive suppliers have been squeezed considerably since the start of the year due to rising steel prices, or because they actually decided to execute a clause in their purchase contracts (good for them). No the story is shocking because it’s Johnson Controls.
For those of you who don’t know the Holland Michigan based supplier, they are known within automotive circles as a leading spend management, supplier relationship management, sourcing best practices firm. Just look at their financial performance vis-a-vis most if not all of their automotive competitors and you will find a top performer. In addition, Johnson Controls often take a more collaborative approach to supplier relationships. JCI as they are known by their stock symbol, tend to adopt the Toyota way of working with suppliers as opposed to the approach taken by GM.
However, according to the Associated Press, a federal judge prevented a supplier of Johnson Controls from raising prices or halting shipments. Now some suppliers are stating they are in grave danger of survival and will therefore halt shipments anyway. Not exactly the Toyota way. But JCI wouldn’t be the first to try such tactics. We covered this story a couple of weeks ago here. It’s time to restore some semblance of market balance among steel producers, component suppliers and OEM’s. If not, we’re going to see some of the best companies turn out to be the meanest!