RapidRatings Blog

5 Lessons Learned from General Motors' Supplier Bankruptcy

Posted by Rapid Ratings on July 21, 2016
SupplerBankruptcy-1.pngThe Ripple Effect of Supplier Bankruptcy: Broad and Deep

A critical 105 year-old automotive interior supplier filed for bankruptcy last week, making General Motors’ worst nightmare a reality. Clark-Cutler-McDermott (CCM, a Massachusetts-based GM supplier, makes approximately 175 parts for GM and relies on the automaker for more than 80% of its revenue. For any company, such a crucial partner’s bankruptcy would be challenging, but for a Fortune 500 company, it can be brand-defining.

Fortunately, GM has lined up companies to replace CCM, but it will still take time to requalify a new supplier. Had GM not been able to quickly secure tooling and finished parts from another supplier, then the bankruptcy would’ve left massive cost implications, with losses likely ending up in the tens of millions. As the aftermath of CCM’s bankruptcy filing continues to unfold, we can already begin to learn our lessons for managing critical suppliers.  Spend Matters' article, "The Ripple Effect of Supplier Bankruptcy: Broad and Deep," provides more details on each of the 5 lessons learned.

5 LESSONS LEARNED from Supplier Bankruptcy

  1. Critical suppliers aren’t interchangeable, meaning the consequences of losing one can be severe.
  2. Understanding a supplier’s financial health is crucial to a strong and durable relationship.
  3. Obtaining a private company’s financial health is difficult, but not impossible.
  4. Constant collaboration is key to understanding how suppliers can – or can’t – help your business succeed.
  5. The best way to understand what your supplier is facing is to listen and ask the right questions.

In a corporate climate that is increasingly hard to predict, choosing to be reactive rather than proactive when it comes to supplier risk management only limits potential solutions. Read more about the keys to resilient supply chain risk management by downloading Rapid Rating's latest whitepaper, “Hitting the Mark: Supply Chain Resilience.” 

 

Topics: Supplier Risk Management, Third-Party Risk Management, Bankruptcies & Default Studies