By Sylviane de Saint-Seine, Automotive News Europe
Supplier associations say US-style â€œpay-to-playâ€ schemes have failed in Europe because partsmakers refuse requests for cash advances to land long-term contracts.
In a typical pay-to-play scheme, a Tier 1 supplier or automaker asks a partsmaker to make an immediate cash payment equal to future savings from productivity gains anticipated over the life of a multi-year contract.
General Motors, Visteon and Delphi are among US companies that have in the past done this.
â€œI am not aware it's a European practice,â€ says Lars Holmqvist, CEO of CLEPA, the European suppliers association. â€œWe in Europe consider these kinds of practices unethical, unfair - the rawest form of capitalism.â€
Holmqvist said he personally encountered two requests akin to pay-to-play a few years ago when he was a Tier 2 supplier executive. Both times, he refused.
The CLEPA chief said he is aware of some attempts to get suppliers to pay in advance for future cost-reduction savings. But he said that, to his knowledge, European suppliers successfully resisted. Supplier executives, who declined to be identified, confirmed this.
European suppliers simply cannot afford pay-to-play schemes because they are less profitable than their US counterparts, said Armand Batteux, chairman of FIEV, the French auto suppliers association. â€œIt would put their financial survival at risk,â€ he said.