Jose Ignacio Lopez de Arriortua Case Essay

1708 Words Mar 13th, 2008 7 Pages
Jose Ignacio Lopez de Arriortua Case

General Motors is one of the world's most dominant automakers from 1931. After 1980s economic recession the main goal for automobile companies was cost reduction. Customers became more price-sensitive. Also Japanese competitors came into market with the new effective system of production. So market was highly competitive and directed toward price reduction. The case states that in 1991 GM suffered $ 4.5 billion losses and most part of the costs of manufacturing was due to purchased components. GM NA hired Lopez in order to find the way from "extraordinary" situation and reduce costs. Answers to the case questions: 1. Andrew Cox states in his article that the ideal situation for buyers is
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Do you believe that Jose Lopez used his supplier leverage appropriately? Was Lopez abusive or appropriately utilizing the leverage that he maintained as the purchasing czar for one of the largest companies in the world under "extraordinary" circumstances? Explain and discuss your answer.
Even though Lopez was known as purchasing czar and succeeded in his work of cutting costs, I do not consider his policy towards relationships with suppliers as correct one. Demanding too much from vendors and not slightly collaborating with them, using coercion and intimidation to reach the cost reduction, not carrying, that suppliers can only provide it, if they incur losses, is not a good way to establish long-term interaction. Although he also wanted to employ the methods of Japanese companies by involving his people to help to improve the manufacturing process in suppliers plants, it was rather compulsory and not achievable in short-term. Internally in the GM he reached some success in productivity, but main thing that he didn't want to share cost savings with supply chain members but to take them all for GM. Additionally, increasing number of vendors and using only price criterion was also a mistake. The better way is to establish coordination with several of them and work closely on solving the problems inside this bond. I might admit that the situation in which GM were before Lopez assumed his duties,

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