Miller said Stellantis has added provisions that expand its ability to prolong the life of a contract.
The Foley & Lardner analysis says the automaker now can unilaterally extend North American purchase orders across multiple vehicle programs and extend vehicle programs more than once. In addition, the terms say purchase order agreements that don’t specify an end date, or have an end date of “9999,” will last for the life of the vehicle program.
“The traditional model in the automotive industry is usually what’s called the life of the program term,” Ellis said. “The supplier has to supply the part for as long as that particular OEM program is in effect. That’s typically been a source of friction. How long does that program really last for?
“But here, Stellantis really has added some language that goes much beyond the traditional model, allowing them to roll over the contract to new or successor programs or additional programs, potentially locking in the supplier for very long time if they have favorable pricing on the part.”
Auto suppliers typically avoid criticizing their customers publicly over such matters.
Some suppliers contacted by Automotive News said they’re studying the changes and did not want to comment. A spokesman for ZF said the transmission maker is “still reviewing these terms and working with Stellantis.”
An executive at one significant supplier to Stellantis said the updated terms and conditions make suppliers’ liability “potentially unlimited.” The executive requested anonymity due to the sensitive nature of the topic.
“Any supplier that signs up for this is basically at the stage where you cannot calculate the rate of return on your investment,” he said. “You have potentially unlimited liability on all kinds of different things, and you don’t know how much you’re going to make.”
The executive said the answer for suppliers frustrated with the changes is to not sign onto a new contract with Stellantis under the new terms and conditions.
“Either use the old T’s and C’s or not do business at all,” the executive said.
Stellantis could be at risk of losing future business from suppliers that are not dependent upon it to remain afloat financially, he said.
“We’re living in a world where we don’t have a great surplus of suppliers,” the executive said. “The suppliers that are in business are good, but they’re all challenged in terms of getting people to work, getting supplies and making a return. And the industry is trying to fill capacity. Demand is there, but we have production shortages. So, any supplier that has the ability to choose among customers is not going to do business with Stellantis.”
