The complexities of following the supply chain

07/14/2014

Another hearing is coming up on the GM ignition switch recall. Being called to testify before the Senate Commerce Subcommittee on Consumer Protection is Rodney O'Neal, the CEO and president of the big automotive components supplier Delphi.

Tracing the story back to a March 30 article in USA Today written by Todd Spangler of the Detroit Free Press, it was noted that Delphi was the "supplier of the part." Note that the article said Delphi was the "supplier" - not the manufacturer. The article that appeared a few days ago in Canada's Business News Network stated that GM said the ignition switches that are to blame for its recent recalls of millions of vehicles came from a Chinese supplier, Dalian Alps Electronics Co. Ltd. [See the blog on GM ignition switch supplied by Chinese firm].

It now appears that Dalian Alps Electronics (a colleague informed me that Alps is a Japanese company with the subsidiary Dalian Alps Electronics being the Chinese manufacturing unit), is the manufacturer of the switches. So did Delphi bid the job for GM, win the bid, then subcontract the manufacture of the ignition switches to Dalian Alps Electronics in China?

My next question concerns the reason Delphi subcontracted the manufacture of the switches to a company in China. Did they low-ball the job knowing they could get a sub-contractor in Asia to do it for the quoted price? Or could it be they bid a fair price for the job but found that they could make better margins on the job by subcontracting it out to a company in a LCC (low-cost ountry)?
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