Live by the Sword - Die by the Sword: A Customer Power Nightmare

Collins & Aikman has until the end of the month to play out its threat to use bankruptcy protection as a last-gasp tool to break over 3,000 unprofitable supply contracts with auto manufacturers. Unwilling to embrace consensual price increases, C&A's Key customer accounts - such as GM, Ford, and Toyota- will soon be forced to pick between higher prices (set at C&A's discretion) or moving their business to competing suppliers and dealing with the risks and challenges that rushed vendor transitions for strategic end product components create.

And worries are mounting in the auto industry that C&A's move is the tip of the iceberg; that Visteon, Delphi, and other suppliers will soon follow the same strategy. Sounds like a messy divorce. What's gone wrong with these relationships?

Live by the sword - die by the sword. Suppliers in any industry, especially the rough and tumble auto business, that myopically focus their growth strategies on cost reduction and inadequate attention to creating tangible (and differentiated) value for top customers will always find themselves stuck on the treadmill of commodity price wars. And commodity product vendors will never earn customer loyalty and benevolent behavior.

Differentiation, tangible value, and a culture of intense Customer Advocacy are the only paths to building enduring, profitable, mutually beneficial business relationships. Senior executives that hide behind complaints about uninterested customers, tough competition, rising fuel and steel costs, and "the reality of our business" rhetoric should ensure they have great lawyers, because C&A's fate awaits them!