Sheet Metal Stamping Simulation

An international scandal erupted in early 1993 when Volkswagen A.G. enticed Jose Ignacio Lopez de Arriortua to walk off of his job as head of General Motors worldwide purchasing.

A native of Spain, he had cut a wide swath in Detroit inspiring fear and awe among longtime GM suppliers. At GM, Lopez served at the pleasure of the Board of Directors, and while at VW he was given a four-year contract valued at $20 million. A master of “lean manufacturing,” Lopez took seven GM executives with him. This so enraged GM that it took immediate legal action. The company asked a German court to issue an order restraining VW from raiding their employees in Europe. 

At the same time, German prosecutors started an investigation into charges that twenty boxes of top-secret GM documents containing purchasing strategy had been stolen. On March 9, 1996, GM formally filed suit in the U.S. District Court in Detroit seeking unspecified damages from Lopez, VW, Chairman Ferdinand Piech and other executives. GM claimed that when Lopez defected to VW, he stole secrets and then destroyed evidence of the theft. In late 1996, VW claimed libel and defamation, and GM answered with charges of racketeering.

After some three and a half years and millions in legal costs, the parties have settled. It took an apology from VW and some billions in cash. Lopez, who has since resigned from VW, as well as the three former GM executives are under criminal indictments on charges of embezzlement and the betrayal of trade secrets. In 2001, criminal charges have pursued Lopez to his native Spain.

This headline-grabbing story gives you some idea of how important purchasing can be. Buying right doesn’t necessarily mean buying cheapest. However, dollars saved by adroit purchasing add to the bottom line the same as profit on sales. Some entrepreneurs find purchasing a tedious chore and often overpay. Many will delegate these jobs to someone else—perhaps a person with little enthusiasm for the job he may think that to negotiate a better price is a Middle Eastern bazaar-like custom.

Let us say that your buyer is an upright, sincere person who has the firm’s best interests at heart, but has no stomach for negotiating. This person will cost you money—dollars that you can ill afford to waste. The cost of goods and services is a major item on any company’s profit and loss statement. You must become cost conscious from day one.