CLEPA, the European suppliers association, wants a fundamental change in the way its members do business with automakers. “Contract terms have become a major problem for suppliers,” CLEPA CEO Lars Holmqvist told Automotive News Europe (ANE).
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“Contract negotiations are very unbalanced and extremely difficult.” Later this year CLEPA will release recommendations for contract terms and conditions. At issue are the risks CLEPA members believe they are taking when entering into agreements. Among those risks: Carmaker demands for the right to terminate or alter contracts at will; warranty and recall obligations and costs linked to rising raw material costs.
“This becomes gambling, not business,” Magneti Marelli CEO Eugenio Razelli told ANE. And Valeo CEO Thierry Morin said his company has walked away from deals over unacceptable contract terms. “We have refused some business, because we are a company that eventually has to answer to its shareholders,” Morin told ANE.
Razelli said the proposed CLEPA guidelines “could be a good starting point, because, so far, there are no standard contracts.”
CLEPA hopes the proposed recommendations will provide suppliers and car manufacturers with a new basis for contracts when they renegotiate. A CLEPA group is currently analyzing a number of automaker-supplier contracts, seeking to identify unfair terms and conditions and establish a list of best practices.
Automakers maintain they work closely with suppliers to ensure viability. Some carmakers, such as Renault, have established risk committees to monitor suppliers’ financial health. But “suppliers are responsible for making the management decisions to solve their problems,” said Renault purchasing boss Odile Desforges.
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