AVG’s Kumar Challenges Big Three

Feb. 6, 2009
Auto Makers Are Spending Close to $1.2 Billion per Year on Automation Control Products

Shalli Kumar, chairman and CEO of AVG, a Midwest-based, vertically integrated designer and manufacturer of electronic parts, is vying for the attention Congress and the mainstream media with some ideas the Big Three automakers’ bailout.

He started with a letter to CNN’s Lou Dobbs which says, in part, that the Big Three are “spending close to $1.2 billion per year on automation control products that are supposed to increase plant productivity and reduce costs. Most of these products are not even manufactured in the U.S. anymore. On the other hand, there are American companies that can provide better products for half the cost, saving Detroit $600 million per year, with products that are manufactured in the U.S., further creating additional high-tech manufacturing jobs here.”

He has followed the Dobbs letter up with similar ones to his representatives in Congress. Kumar wants to make a discussion of Detroit’s procurement practices part of the debate about giving more money to the automakers. “I would like a component in policy-making for a bailout,” he says. “Let there be a public discourse on this. We are a global economy, but if there are products that are a better solution for the same or less money, then they should buy in America. Congressional hearings will take place regarding the union labor costs and conditions, but I don’t think there is an understanding in the public of where else they will be spending the money wisely.”

Chrysler already has received $4 billion in federal short-term loans. GM has received $9.4 billion. Both companies hope to receive additional financing in mid-February. Ford rethought its request for help from the federal government and so far has declined any funding.

When contacted about Kumar’s remarks, General Motors declined to comment, but Chrysler spokesperson Mary Beth Halprin defended her company’s policies, saying that standardization makes financial sense, but that a component’s true cost must be calculated in a larger equation. “There’s a negative cost side to make a switch on controls—to jump from vendor to vendor—especially if you’re only targeting certain parts,” she said. “We are continuing to study new opportunities to improve our controls strategy while not compromising the specifications needed in our plants. If any supplier has ideas, we welcome them and encourage them to contact us about these ideas. There’s more willingness in our organization to look at new opportunities in manufacturing and sourcing.”