It’s not only what you say, but how you say it

Last July, GM overhauled its supplier contracts; now it’s overhauling the overhaul. This time, GM is working with its suppliers’ council to develop contract language both sides can live with.
According to Automotive News, the problem GM faced is that many of its suppliers read its new contract language as overreaching. In the suppliers’ view the new terms unfairly shifted to them a greater share of warranty and safety-recall liability exposure and cost, among other things. GM’s global purchasing chief, Grace Lieblein, acknowledged to Automotive News that GM’s new contract language “left a lot of room for interpretation” and that it “was getting interpreted differently from our business intent.”
GM’s experience teaches several important lessons for developing and maintaining healthy OEM-Supplier relationships.
The first is the need for trust. It may sound simplistic or Pollyannaish, but an OEM-Supplier relationship requires trust on both sides to work.
Second, trust is earned, not given. GM no doubt made significant strides towards earning its suppliers’ trust by dumping the reworded provisions and working with its suppliers’ council to replace them.
Third, the recent GM experience underscores the need for open communication. GM’s suppliers voiced their concerns, and GM responded positively and effectively by involving its suppliers in the contract drafting process.
Fourth, contracts – like most any other business documents – benefit greatly from the use of clear language that does not “leave a lot of room for interpretation.” Although GM did not release the contract language that alarmed its suppliers, odds are it contained a fair measure of legalese – that is, virtually indecipherable legal jargon wrapped in redundancy. Clear, simple, precise language clarifies the writer’s intent – business or otherwise – reduces the need for interpretation, minimizes the chance of misinterpretation, and promotes ease of application of contractual provisions. For these reasons it also fosters trust among the contracting parties.

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2 Comments

Filed under Best Practices, Resolving Disputes, Warranty

2 responses to “It’s not only what you say, but how you say it

  1. Pingback: La relazione col cliente? Fatela facile… | AICEX

  2. Pingback: Plain and simple | Driving Value

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