@Risk

There’s an interesting supply chain debate heating up in the auto industry as suppliers to Volvo Cars are voicing significant concerns about the company’s current favored bidder, China-based Zhejiang Geely Holding Group Co.

The suppliers –including Autoliv Inc., the world’s largest maker of automotive air bags, and IAC Group, the U.S. interiors supplier owned by Wilbur Ross –want assurances that Geely will protect their patents and not plagiarize products in China.

Svenaake Berglie, who heads FKG, a group that represents 300 automotive suppliers, told Bloomberg that tech-heavy suppliers are “definitely concerned about China’s record when it comes to copyrights.”

This is a textbook example of the buyer-supplier relationship as a two-way street. I’ve posted about it before, but it’s worth repeating: buyers don’t just choose suppliers –suppliers choose buyers, too. Particularly now, when success demands that all companies keep a keen eye on a wide spectrum of risks, suppliers are segmenting buyers. They’re assessing factors such as buyer regulatory risk, customer financials, channel profitability –and intellectual property protections.

Supplier risk management involves mitigating supply chain disruption. Those disruptions may occur because a supplier can’t supply a component, or they could happen because a supplier won’t supply a component.

Sounds like Geely is going to have to carefully consider those risks as it continues negotiations with Ford Motor Co.

BTW, Bloomberg is reporting that Geely is prepared to pay about $2 billion for Gothenburg, Sweden-based Volvo, less than a third of Ford’s purchase price a decade ago. What’s more, analysts expect Geely to move Volvo production to China from Sweden and Belgium in three to four years.