“I don’t want to bite the hand that feeds me, but I do think there are systemic problems or limitations on the way we do things,” said Ron Hall Jr., chief executive officer of Bridgewater Interiors, a seating manufacturer started by his father to supply GM in 1998. “There’s a growing challenge, just born of time, and succession planning at companies, and rolling them from one generation to another.”
Unlike many minority entrepreneurs, Johnson began his automotive career with a substantial amount of financial and social capital. Nicknamed “The Microwave” for his ability to come off the bench hot and score points, Johnson helped the Pistons clinch a repeat NBA championship in 1990 with a game-winning shot at the buzzer.
After retiring from the NBA, he leveraged his celebrity status and earnings to break into the auto industry. In 1995, he founded a corrugated-pallet manufacturer in an economically ailing area eligible for tax subsidies, known as a Detroit Empowerment Zone. That same year, the MMSDC certified him as a minority-owned supplier, which made him a more attractive partner for local automakers. Meanwhile, Johnson forged relationships with top auto executives, golfing with former Ford CEO Alan Mulally, and acquiring a unit of troubled airbag maker Takata Corp. in a deal executives from Ford and Fiat Chrysler Automobiles NV helped broker.
Today, the company employs more than 11,000 people in Michigan, Ohio, Illinois, Kentucky and Missouri, and Mexico.
As Johnson grew his empire using his minority supplier status, he periodically had issues complying with the designation’s requirements because of the lack of minorities involved in day-to-day management, the MMSDC said in a legal filing. In business meetings and at trade shows, customers and competitors have long noted how White the top ranks were—an anomaly among minority-owned suppliers, according to five people employed by former customers and competitors, who asked not to be named publicly.
The company counters that it’s been “proactive” in hiring and promoting minorities and has a plan for increasing diversity in leadership.
‘Our policies are not designed to create wealth for one’
The MMSDC has been nudging Johnson to diversify his executive ranks, it said in court filings. Tensions boiled over in February, when the nonprofit, whose governing board includes executives from Stellantis, Ford, GM and Toyota Motor Co. stripped the Piston Group of its certification, jeopardizing as much as $2.5 billion worth of business, the company claims in its lawsuit. Ford and Stellantis make up 75% of the Piston Group’s sales, the lawsuit claims.
A Ford spokesperson said the company doesn’t comment on litigation not related to Ford. Stellantis declined to comment on the Piston Group, but pointed to the $90 billion it has spent with diverse suppliers. GM said it supports the MMSDC, but will continue to do business with the Piston Group regardless of its certification status. Those contracts won’t count towards its minority spending figures.
“Third-party certification is not a requirement for doing business with GM, but it does generate advocacy support and access to specific programs and resources,’’ David Barnas, a GM spokesperson, said in an email. “We will continue to measure the Piston Group of companies based on their behaviors and business results to ensure alignment with our corporate values and priorities.’’
The Piston Group’s lawsuit describes an escalating personal dispute between Johnson and Michelle Sourie Robinson, president of the MMSDC. It accuses Robinson of moving the goal posts on certification to punish Johnson, demanding that he replace one of his top lieutenants, who is White, with a minority, and keeping the company in the dark about the metrics used to decertify it. The MMSDC denies it demanded the removal of executives.
“If the MMSDC is permitted to conduct its business in an arbitrary and malicious manner, without regard to standards, and in a way that targets companies and individuals based on personal vendettas, the validity of all diversity initiatives and programs are at risk,” Johnson’s lawsuit states.
Louis Green, a former president of both the MMSDC and the National Minority Supplier Development Council in New York, said the certification process is intentionally opaque in order to prevent fraud.
“There are people who make a front company, put a woman or minority at the front to get the contract,” said Green. “I would liken it to IRS auditors who have a handbook of things they need to look for when somebody may be trying to fool the government about taxes. They don’t make that public.”
John Taylor, a professor of supply-chain management at Wayne State University in Detroit, said the Piston Group is big enough to compete without minority designation as long as it remains competitive on cost and quality. Small suppliers will still follow the MMSDC’s rules, because they need the support, he said.
A court hearing for Johnson’s case is scheduled for Sept. 2. Regardless of who wins, it’s the auto giants at the top of the supply chain, with their billions of dollars in procurement contracts, who will decide whether the criteria for minority-owned businesses matter, said Green, the former NMSDC president.
“Are customers going to honor their commitment to use certified businesses? Or will they say, ‘Hey, we can still work with other certified businesses, and keep Vinnie around?” he said. “That sends a very powerful message to others.”
This article was provided by Bloomberg News.