Technology Triumphs Over Price and Conditions

Robert Bosch has been awarded new business by Ford Motor Co. even though the German supplier has refused to comply with new terms and conditions in Ford’s global supplier contracts.
In a story in Supplier Business, industry sources say Bosch was prepared not to sell to Ford if it meant complying with terms that include a clause allowing Ford to deduct money from suppliers’ accounts without prior notice. The revised contract language took effect on January 1 2004.
“Even though they haven’t reached accommodations…they’ve been awarded business without having agreed to the terms and conditions,” says a source familiar with the Bosch-Ford dealings quoted in the article. “Their technology is very unique in certain areas, and Ford needs it.”
Bosch and Ford declined to comment. Other European suppliers are also known not to have signed the contract.
Supplier industry leaders say Ford is being unreasonable.
“Toyota and Honda … have demonstrated the value of a collaborative partnership,” says Neil De Koker, president of the Original Equipment Suppliers Association, the U.S. supplier organization. “When you talk to Honda, you never even talk about terms and conditions. They have them, but their behaviour is so different that they don’t refer to it, they solve problems jointly, they go into each other’s factories and work things out if ever there is a problem.”
The contract allows Ford to deduct money directly from its accounts payable to a supplier if the carmaker decides it is owed money.
The OEM can call off a purchase order at any time for “any or no reason” and suppliers could be charged for half of the costs of a product recall.
Ford also can also undertake comprehensive auditing of suppliers’ operations.
“Maybe by moving the liability legally on paper more towards suppliers there would be less liability on the part of the OEMs legally,” says De Koker. “I’m guessing that might have been a factor. But I am worried that they would allow their legal staffs to have that much influence over such a vital thing as the relationship with one of their critical partners who provide two-thirds or more of the content of the vehicle.”
De Koker says: “It’s so extreme that people really will be concerned about sharing their latest intellectual property with Ford Motor Co., and that’s not good for Ford. They need their suppliers’ best innovation, rather than having them try to sell it to one of Ford’s competitors because they trust them more.”