From 1 November this year GM will start paying its parts and logistics service providers every week rather than every 47 days in a move to improve the company’s cash flow and better support struggling suppliers.
Many suppliers awaiting payment have been forced to rely on credit lines to cover the period following parts delivery, which in some cases reached 90 days. However, the company denied that the new system was the result of supplier pressure, instead stating that it was for the benefit both GM and its suppliers to reduce cash volatility, improve cash low points and reduces cash balance requirements. The payment adjustment will also reduce the probability of suppliers having to draw on bank lines of credit to cover cash troughs said GM spokesman Daniel Flores.
The move covers 1,400 parts suppliers and 300 logistics providers in North America with longer term plans to implement the scheme globally.
Ryder, which counted GM as its single largest customer prior to the carmaker’s bankruptcy proceedings, refused to comment on the development.
In a separate development, Visteon is discontinuing parts supply contracts with GM, along with Ford, Chrysler and Nissan. The company, which is currently going through its own bankruptcy process, is narrowing its business offering to electronics, climate control and interiors.
“GM has work closely with Visteon to help them in their restructuring efforts,” said Flores. “This involves assisting Visteon in the closure of their non-performing US-based businesses.”
“GM will retain portions of business in Canada, Mexico and other regions that fit into Vision's restructuring plans,” continued Flores. “Most of our work with Visteon is located in Mexico and Canada. We will manage through the transition.”