DETROIT — Stellantis has made controversial changes to its purchase order terms and conditions for 2022 that can force North American suppliers to reduce prices whenever they achieve any cost savings and to remain locked into unfavorable contracts for as long the automaker wants.
Lawyers who have analyzed the new language say those are just some of the modifications that have raised concerns among suppliers they have been in contact with. They say some suppliers were not even aware that Stellantis had reworked the terms and conditions they are required to follow.
The changes took effect Jan. 1, nearly a year after Stellantis was formed by the merger of Fiat Chrysler Automobiles and PSA Group.
A former Stellantis insider said the moves are driven by "unrealistic savings goals" sought by the automaker.
For suppliers that received "requests for proposals in December, we had heard that there were new terms and conditions being included, but there was not a real formal announcement that these terms were changing," Vanessa Miller, a partner at Foley & Lardner LLP in Detroit, told Automotive News. "That is different than what we saw in 2021 with a couple of other OEMs that provided not just advance notice and a heads-up to the supply base, but they also provided a lot of lead time."
Ford, for example, delayed the effective date of new terms last year in response to feedback from the supply base, Miller said.
Miller and colleagues Nicholas Ellis, Regina Gilmour and Amir El-Aswad studied the updated Stellantis N.V. and FCA US LLC terms and assembled a list of suggestions for how suppliers can cope with the changes.
The lawyers said Stellantis altered the "direct materials" global terms and conditions that are common to suppliers in all regions, and an addendum called Exhibit A that covers North American suppliers.
The lawyers' report says identifying the changes is only the first step. Second is determining "whether these terms are acceptable for existing business or whether certain objections should be raised."
Miller said the law firm has had "back-and-forth discussions" with about a dozen suppliers that reached out saying "they are concerned about how this going to play out, and just wanting more clarity into what the practical implications are of these changes."
Stellantis declined to comment this week.