To obtain CLEPA’s perspective on OESA’s recently revised purchase order model terms and conditions and other issues, Colin Whitbread recently interviewed Lars Holmqvist, CLEPA’s CEO.
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Do the October 2004 OESA model terms and conditions have any relevance for Europe at this point?
We are in contact with OESA and we are talking about all our major projects including the model terms and conditions. We do have a very deep co-operation with both OESA/MEMA and JAPIA so we try and compare. But we also notice the differences between the three different continents. There are big differences in doing business between Europe and the US, between Japan and Europe etc.
We are, however faced with global customers and many of our members are global as well. What we are looking at is what is global practice and what is regional. There are two things. Law is different between the continents, especially between Europe and the US. So we have a major discrepancy there.
Then we have differences in business practices. It is always very difficult to adapt things from a different environment but there is obviously a lot of work that has gone into the OESA model terms and conditions. We are studying them and we will of course discuss them further with Neil (de Koker). We will learn from them and possibly use part of that in our negotiations.
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By GlobalDataHowever, for the moment we don’t have any model terms and conditions that we are introducing to our customers. This might also be because we have a very different business climate between our different customers.
The three American-based ones – GM, Ford and DaimlerChrysler are one group and they have a very different way of doing business from for example BMW. And BMW is totally different from Toyota.
Certain areas are in common; that goes for intellectual property and for warranties. In those areas we are discussing and learning and we have already presented a white paper on warranties that we think is the way we should go forward.
We have compared that with our friends in the US and Japan. We work on these kinds of issues but at the moment we are not taking the OESA paper and working that into a European version. We think we possibly need something different.
We have long-established “guidelines for business” with our customers but needless to say, those are a little bit old and even from the start not everybody has followed those guidelines. There are areas where we think one way and customers in a different way.
The best example of that is the Ford Global Terms and Conditions which we are not at all happy with. I think we probably won’t end up with a model terms and conditions but we will help and support each other and obviously our aim is to build a fair partnership between buyer and customer.
That might mean a slightly different thing in Detroit or Munich or Tokyo. We are a more diverse group – there are big differences between Italian and Swedish practices, Polish and Bavarian practices for example.
The general guidelines are going to be roughly along the lines of the basic principles of OESA’s terms and conditions but they will be different.
So there will be differences in approach between say GM in North American and in Europe?
If you take Ford for example, they are trying to introduce global terms and conditions. In our opinion a thing can be legal in the US but illegal in Europe.
At CLEPA, as an industrial association, our main concern is not with commercial terms because they are between the two parties, what we are concerned about is protecting our members from practices that are unethical or not legal. There is a big difference.
Have you managed to convince Ford that its global terms and conditions are not necessarily applicable or legal here in Europe?
No, I can’t say we have, but we are still trying to do that. We will keep on trying and use all means necessary to try and convince Ford.
Are you in discussions with all the OEMs regarding contract terms?
No. We as an organisation are not involved in any other terms and conditions discussions apart from those with Ford. We are also discussing others but this is through the national associations such as FIEV in France and the VDA in Germany.
They talk to their national OEMs and have, more or less, organised sessions. We only try to co-ordinate things like that. FIEV co-ordinates discussions between Renault and PSA and Faurecia, for example.
What are the specific relevant differences in law between the US and Europe?
In the US you have a different mentality. You have a lot of litigation going on. Being a layman I can only see the reason for this being because the law is not as clearly stated as it is in Europe. Here we have a lot of binding practices. I think in the US its more relaxed and also more widely sweeping. Here it’s more detailed – you don’t have to go to court.
Is there any kind of timetable you working to in order to solve the disagreements with Ford?
It will evolve. We would like to resolve the issue tomorrow. We are doing what we can but we want to be very professional. It takes time, it’s a very complicated area. We have collected a lot of professional opinions about it so we have a very firm opinion about it.
Have you made specific recommendations to your members about whether or not they should sign Ford’s terms and conditions?
We have pointed out to members that certain parts of the terms and conditions are in breach of European law. We have also pointed out that they are then at risk if they are found to have committed a breach of the law. Then its up to them to take the decision whether to sign or not. In the end it’s a commercial decision.
Do you have a sense at this point how many of your members have actually signed Ford’s terms and conditions?
Quite a lot of them have signed but many have made arrangements with Ford – its not straightforward, just sign and nothing else. They have negotiated with Ford.
In what sense have they negotiated?
Ford prefers to negotiate with suppliers on an individual basis regarding the terms and conditions. They don’t negotiate with organisations like CLEPA.
Could those negotiations include some kind of opt-out from clauses that were illegal in Europe?
I can’t really say because that’s individual negotiations between two parties. Do they agree on things that are major or minor? I have no idea because we are not involved. It’s up to the two parties to find an agreement.
Unofficially, I know roughly what are the main points for each given company but I’m not part of that negotiation. I only know that they are taking place.
What are the reasons for signing?
Purely commercial, end of story. If you are supplying Ford to the tune of €2bn a year, it’s a major decision to take on a fight with your customer. You might then be put on business hold.
Ford, GM and DCX have this system of business hold – if you don’t comply with these rules and regulations you might end up on that list and you won’t get any new contracts.
Should these specific contract problems be seen in the overall context of the OEM/supplier relationship? Is too much emphasis being placed on terms and conditions?
No I don’t think so. If you don’t need them, if you are good partners, than you shouldn’t force people to sign such terms and conditions. The only reason you force people to sign them is so you can use them at your convenience.
In an ideal world you don’t need a contract, but the world is not like that. If anyone comes along and says to me why don’t you sign the terms and my reply is that I don’t agree with them, it makes no sense if they then say well we won’t use them anyway. In that case, scrap them.
That is an argument I have heard from, among others, Ford and I don’t buy it. Either you have a contract that both parties are comfortable with or you don’t need one. You have a commercial bind anyway.
In summary, it seems as if there won’t be a need for an OESA-type model terms and conditions document in Europe but rather more updated guidelines?
Yes, I think so. I think we would rather produce some general guidelines which we like to see followed by both parties, rather than to go into as much detail as OESA has done.
But the specific problems with Ford’s general terms and conditions are likely to fall outside of such guidelines?
There is a specific problem still as we see it. But our general guidelines have not been renewed yet. That will take some time and by that time we hope that we will have solved the problem with Ford so that we can include the company in our general guidelines.
My personal belief is that to remain competitive we have to be good partners.
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