In the News

December 13, 2018

 

E-Commerce: The Wave of B2B’s Future

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GM’s Planned Cuts Require Action By Suppliers to Submit and Protect Claims for Recovery

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Serving Timely Notice(s) of Nonpayment in Tennessee: A Common Pitfall

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Proud of the Past, Ready for the Future: US Small Businesses Economic Outlook

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Is It Harder to Pierce the Corporate Veil of a Limited Liability Company? Part II

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E-Commerce: The Wave of B2B’s Future

“You’re losing revenue by avoiding e-commerce.”[1]

According to the 2018 Avionos Procurement Officer Report, which surveyed 160 U.S. business-to-business (B2B) procurement officers, B2B companies will be left in the dust by competitors if they do not embrace e-commerce. The digital services and solutions firm’s report highlights several main aspects of going digital and taking a company’s retail store online to suit their customer’s needs.

“If your business lacks robust e-commerce capabilities, you’re already losing wallet share to digitally enabled competitors. And if you don’t have plans to improve your e-commerce capabilities, you risk becoming obsolete,” states the report.

One of the biggest factors, according to Avionos, is the workforce generational shift from Baby Boomers to millennials—nearly half of those surveyed thought of themselves as part of the younger generation. millennials have been raised on e-commerce, having the power to purchase nearly anything via the internet both in the consumer and B2B world, and according to Forrester Research, B2B e-commerce will only continue to grow. U.S. B2B e-commerce will reach $1.2 billion by 2021 and be more than 13% of all B2B sales.

“Leveraging the power of cloud software, you can quickly react to trends, meet changing customer needs and maximize sales as the B2B ecosystem evolves,” states the Avionos report. One of the more surprising facts is more than eight out of 10 respondents said they “would choose a supplier with excellent e-commerce and customer portal capabilities, even if the supplier’s product was moderately higher priced than a competitor’s.” This shows how important an online presence can be for suppliers. Roughly 90% of procurement officers are making more online purchases than they did just one year ago.

According to a recent article from MarTech Advisor, there are five ways to boost e-commerce sales and increase repeat customers. They are customer profiling, personalization, customer service/customer support, build trust and incentivize. “While selling to new customers brings in more business and improves your brand visibility, focusing on existing customers will support business longevity. The probability of purchasing a new product or service by an existing customer is about 70% greater than by a new customer,” states the article.

The key for B2B companies is to offer specific items for customers online. Having that online presence is only part of the solution as just 15% of B2B buyers start their search on a supplier’s website—the large majority use Google and Amazon with a handful using a supplier’s catalog. Quality content is what buyers are searching for when researching products. Avionos states businesses should allow customers the ability to “research, configure and purchase products via self-service portals before, after and even during an interaction with a sales representative.”

[1] The 2018 Avionos Procurement Officer Report

—Michael Miller, managing editor

GM’s Planned Cuts Require Action By Suppliers to Submit and Protect Claims for Recovery

In the face of what CEO Mary Barra of General Motors calls a “fast-changing market,” GM announced plans to end production of certain vehicles, reduce its North American workforce by more than 10% and idle five plants in the U.S. and Canada. General Motors also announced that it plans to cease operations at two additional (but not yet identified) plants outside of North America by the end of 2019. The moves are intended to save GM $6 billion by the end of 2020. While the market reacted positively to the news—shares in General Motors were up 4.8% to close to their highest closing price in recent months—this action by GM will no doubt have an impact on its suppliers, as well as sub-suppliers within its supply chain.

Barra made the announcement, which was followed later that day by a “Supplier Notice” sent by General Motors to its many suppliers. In that communication, GM said that it was “continuing to take proactive steps to strengthen our overall business performance and become more agile, resilient and profitable, while the company and economy are still strong.” In order to do that, the company plans to align its manufacturing capacity with market demand. This action by General Motors comes in the face of a slow-down in new car sales, shifts in consumer demand for pickup trucks and sport utilities instead of smaller vehicles, and increased focus by GM on electric vehicles and self-driving technology.

“In addition to dealing with capacity and leverage challenges, we are expecting suppliers to face a softening of volumes over the next 18 months. Furthermore, transformation of the existing production capabilities to those suited for alternative vehicles will be a key challenge,” according to Laura Marcero, industrial practice leader and head of the Detroit office for Huron Consulting Group.

Approximately 3,300 production workers in the United States, and approximately 2,500 production workers in Canada, are expected to be affected. In addition, General Motors plans to reduce its salaried staff by approximately 8,000 (only 2,250 of its white-collar workers recently accepted a voluntary buyout, so additional cuts must be made to reach the 8,000 target). By the end of 2019, General Motors plans to idle three assembly plants—Detroit-Hamtramck, Lordstown, Ohio, and Oshawa, Ontario. In addition, General Motors plans to idle two propulsion plants, Baltimore Operations in Maryland and Warren Transmission Operations in Michigan.

Importantly for suppliers, General Motors announced that any “applicable claims” should be submitted within 90 days. These include termination and due diligence claims, and obsolescence or prototype. For example, termination claims apply where a supplier has not yet shipped parts to General Motors, but has incurred development costs. Due diligence claims involve suppliers affected by the acceleration of volumes and the end date for production. Both allow suppliers to pursue recovery of certain development costs such as tooling and ED&D. Suppliers also may submit obsolescence claims to recover for inventory and work-in-progress (WIP) through General Motors’ standard procedures for submitting an obsolescence claim.

General Motors’ requirements for the submission of claims are extensive, and may be subject to specific terms of the supplier’s contract with GM. Suppliers also should review their agreements with affected sub-tier and material suppliers to ensure compliance with any notice and termination requirements, as well as other obligations, such as union contracts, leases and other contracts, that may be impacted by the closures. The resolution of submitted claims is often the result of extensive negotiations between General Motors, its suppliers and affected sub-suppliers.

Reprinted with permission.

Ann Marie Uetz is a partner and trial attorney with Foley & Lardner LLP, where she represents upper and middle-market businesses in all aspects of their contracts and business disputes, as well as creditors and secured and unsecured lenders in all facets of financing and restructuring. She focuses on the manufacturing industry—chiefly suppliers in the automotive and defense industries—and advises her clients on acquisitions, procurement and supply contracts, and disputes that arise within the supply chain.

Mark A. Aiello is a partner and co-chair of Foley & Lardner’s Automotive Industry Team. He focuses on business transactions and commercial litigation, including supply chain agreements and litigation, product development and protection, as well as warranty and recall litigation.

Nicholas Ellis is a senior counsel and litigator with Foley & Lardner LLP. His practice focuses on the Uniform Commercial Code (UCC), supply chain disputes, warranty claims, contract law and business tort law.

Serving Timely Notice(s) of Nonpayment in Tennessee: A Common Pitfall

Lien rights on private construction projects vary by state, as anyone familiar with construction credit understands. Failure to review statutes and the fine print in laws can and has resulted in the loss of lien rights over something that may, on the surface, seem arbitrary to look into further.

Tennessee is no exception, differing from other states in statutes surrounding notices of nonpayment (NNP). NNPs for Tennessee must be served within 90 days, not just postmarked. Notice of Nonpayment to the owner and contractor must be served within 90 days of the last day of each month of furnishing. For example, if goods are delivered March 12 and again May 20, an NNP must be served by June 29; or, suppliers can file two NNPs, the first by June 29 and the second by Aug. 29.

David Huff, a Tennessee attorney at Smythe Huff and Hayden, PC, said he has seen creditors lose their lien rights more than once on this regulation. In November of 2018, a construction company, unaware of the state’s law regarding NNPs, was owed a substantial sum on a project in Tennessee. When the creditor attempted to serve an NNP on the owner and the general contractor, both of which were in other states, the company could not serve the NNPs in time. The only option the company had, Huff said, would be to hand-deliver the notices in person, something that would not be logistically possible at the time for the company.

“In this case, we have a defective notice,” Huff said. “My hope would be that it’s going to be paid before you have to enforce a notice of the lien. You really don’t want to do that, particularly with the legislation that came down last year that basically gives the owner the chance to recover substantial damages against you.”

If liens are filed improperly and enforcement is pursued in court under new Tennessee law, suppliers can face $100,000 or more in statutory damages, meaning any misstep in Tennessee law can have even steeper consequences than in most states. Huff commented on this law in eNews on Oct. 4, stating, “Before you file the suit on that [lien], you want to be as sure as you can be that it’s going to be upheld, because when you read the statute, if you lose for any reason, you can get these potentially expensive penalties.”

Huff said the lien laws in Tennessee are typically held to a strict standard; he gave the example of a similar NNP case he dealt with where the supplier attempted to meet the 90-day deadline by emailing the NNPs to the recipients. While the recipients acknowledged receipt of the NNPs within the 90-day window, the court decided the email notice was still invalid; it had to be served by certified mail, return receipt requested, overnight delivery (like FedEx or UPS) or by hand-delivery.

The best advice Huff offers to avoid this predicament in Tennessee comes down to a basic principle of credit management: communicate with your customers, keep on top of payments and understand every circumstance.

“What I typically tell clients is that if you have something labor or materials that were delivered more than 70 days prior, you need to get your attorney involved,” Huff said. “You have to be sure you know what’s going on and get a good understanding of it. That gives your attorney time to do the necessary title work we have to do and get the notice out in ample time to make sure it gets in their hands by the 90th day.”

To learn more about lien laws in your state, visit NACM’s Secured Transaction Services (STS) website and search in the Lien Navigator. The Lien Navigator organizes laws by state, province, and U.S. territory, providing members with detailed information on specific laws for wherever a project may take place.

—Christie Citranglo, editorial associate