> Articles > Magna squeezing small suppliers
From the Toronto Star Feb. 24,
2005. Business Section
Cutting costs is
the key to Magna International Inc.'s success in the middle of a
cutthroat war among auto makers to remain competitive.
reduction and productivity are really the name of the game,'' Magna
president Mark Hogan said yesterday after a breakfast meeting in
Brampton at which he lamented manufacturers that expect annual
reductions of 8 to 10 per cent.
the targets that have been set by the manufacturers have been very
aggressive and in many cases we haven't been able to meet
those," Hogan said.
"You have to
survive in the here and now. That means cost reduction."
But at least one
small-parts supplier has balked at such cost-cutting demands and is
now in court with Magna subsidiary Intier Automotive Inc.
Last year, Intier
demanded that Aurora-based Axiom Group Inc. slash its prices on all
contracts by 31.8 per cent. Axiom, which makes small parts for
window systems, said such a cut would eventually kill it and instead
offered a much smaller reduction. Intier responded in the fall by
giving a 90-day notice that it would cancel Axiom's contracts.
But a judge last
week awarded Axiom an interim injunction preventing Intier from
immediately terminating about 40 contracts, some of which run
through 2009, until a trial resolves the dispute between the two
Hogan did not
answer whether the Axiom-Intier fight has changed how Magna does
business with its suppliers, saying he did not want to comment while
the matter is in court.
But Steve Rodgers,
Magna's vice-president of marketing, talked generally about the
tensions between so-called Tier 1 and 2 suppliers.
want to beat up on suppliers, but at the same time sometimes we have
to make tough decisions to make sure that we're focusing on
competitive suppliers that will keep our jobs and our employees in
our plants successful.
"We don't want
to be aggressive," Rodgers said.
"We work like
crazy to try to make our own facilities more competitive, more
efficient, more lean. But the supply base that we have in turn also
has to be there. If we stick with a supplier that is uncompetitive
in quality or is uncompetitive in price, it drags down all of our
businesses, and no longer allows us to maintain our manufacturing
facilities in Ontario."
When asked about
Rodger's comments, Axiom president Perry Rizzo said: "We
categorically state that the innovations and cost savings which
Axiom has provided are unparalleled in the industry.
is not with competitiveness. It is with Intier continually moving
the goalposts. They are now benchmarking Canadian suppliers against
third-world labour rates and third-world supply costs."