GT Advanced COO: Apple Told Us 'Put On Your Big Boy Pants and Accept the Agreement'

[Michael Goff]

No, please don't put words in my mouth. Apple has certainly been wrong many times before, and they will be wrong many more times in the future. But there are people on these forums that only comment on things they think Apple is doing wrong- never on neutral things or good things. Which is certainly their right, but it makes me wonder what their motivations are.

I mean, if I could only find negative things to say about Apple, I would take that as a sign that I should probably stop buying Apple products and posting on Apple forums.

Ah okay. I wouldn't say Apple is the only one in the wrong here, to be honest, but I would say they're not completely clean either. Also, I think you should day negative things about a company whenever you think them. Doesn't matter who it is.

Of course, people will respond to your negativity. That's another thing people should get used to.

 

[Kabeyun]

I'm interested to hear Apple's side of the story.

 

[collegitdept]

This is nothing new for large powerful companies.. Walmart is a client of mine at my job and it's their way or they will find someone else who will.

This is not the same at all. You're selling finished goods. Walmart is the retailer. You depend on them for real estate (on store shelves) for exposure to customers to buy you're product. You're considered a VENDOR. And the reason why they can strong-arm you (and do) is because the finished good is a COMMODITY.


Apple & GTA entered into a supplier (BoM/Supply-chain relationship) this completely different. They supplied components (not a vendor looking for retail space to customers) to Apple and supplied to other companies as well.

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You haven't a clue what you are talking about. Companies can spend millions developing a contract, foregoing other customers (a condition of this contract) and you can easily end in a place of no return; it happens everyday and is actually a stable method of contract negotiation , I.e get your vendor or customer into a place of no return before they get you into one.

Again. This is not reality at all. This was not a VENDOR relationship but a SUPPLIER (supply-chain/BoM) relationship.

"get your vendor or customer into a place of no return before they get you into one" This does not make any sense at all in the case at hand. In order for this to be true, you're assuming they had a relationship beforehand - that's how a party can "get...vendor into place of no return".


Again, this is not reality. Both parties never had prior arrangements before. This was a new arrangement.



"Companies can spend millions developing a contract" again this is NOT a VENDOR relationship. Supplier/Supply-Chain BoM contracts are unique and ARE negotiated - even more so and definitely for specialized and NOT-commoditized components. The component that GTA was contracted to produce - and failed - were unique and first to market. Therefore, any pre-written or "template" contracts wouldn't relevant. The component was new - and therefore required a "new" contract. Contract signed after BOTH parties come to amicable and fair agreement for a relationship.

 

[macfacts]

...

I still suspect that when everything comes out it will be clear that Apple was the victim. ...

No one put a gun to Tim Cook's head to sign the deal. These are two companies here. Not one company vs an individual or anything like david vs Goliath. Both companies are playing in the big boys playground.

 

[ToroidalZeus]

No they can't. If no contract has been signed - there isn't a legally binding agreement.

What are talking about?



The main point is GTA THE SUPPLIER. Bankruptcy was a free cash-flow problem resulting from negligence in managing their finances. PERIOD.

There isn't a shared responsibility between the 2 parties at all.

I passed Business Law in University and apparently you have not taken the course.

 

[hleewell]

Yeah, we all know Apple I tough to do business with given their size and power, but GT's officials sound more and more like a kid who is complaining to his mum about a bully in school.

What are you gonna do? Keep it all inside for 20 years and turn into a serial killer?

 

[ToroidalZeus]

Again blurring personal judgement with business.

This completely normal and regular to require that supplier company not use same materials/resources in producing non-commodity components for competitors! Again why would anyone think otherwise?

How is it justified for supplier to then build a specialized component or use specialized process for a competitor?

This is standard in any supply-chain/BoM agreement for non-commoditized components.


Lastly and most important: Apple fronted the money for said equipment! This gives them more say over the equipment they paid for.

A regular loan from the bank or funds raised through the sale of bonds or stocks would allow the furnaces to be used for any purpose.

The fact that Apple's money can only be used for Apple's products shows precisely how "not standard" their agreement was. They weren't just using them as a supplier, they were in some sense an independent contractor except they weren't even really independent.

 

[spectrumfox]

You haven't a clue what you are talking about. Companies can spend millions developing a contract, foregoing other customers (a condition of this contract) and you can easily end in a place of no return; it happens everyday and is actually a stable method of contract negotiation , I.e get your vendor or customer into a place of no return before they get you into one.

Exactly. Gotta love all of these armchair business majors here, eh?

 

[Karma*Police]

Good gravy. If this is even close to true, it looks like Apple ran these guys into the ground.

Right, cos that was in Apple's best interest and Apple's goal all along was to get stuck with hundreds of millions of dollars worth of furnaces.

How about these guys got too greedy and accepted terms that they probably knew they couldn't keep?

Plenty of smaller companies do business with Apple and profit handsomely from the relationship.

 

[collegitdept]

I passed Business Law in University and apparently you have not taken the course.

Then clearly I'd retake it that course if I were you.

 

[TomMcIn]

Exactly and this whole ordeal gives a good insight into how Apple deals with it's suppliers.

Or how scummy suppliers deal with Apple.

 

[ToroidalZeus]

Then clearly I'd retake it that course if I were you.

Why?

 

[Diversion]

This is not the same at all. You're selling finished goods. Walmart is the retailer. You depend on them for real estate (on store shelves) for exposure to customers to buy you're product. You're considered a VENDOR. And the reason why they can strong-arm you (and do) is because the finished good is a COMMODITY.


Apple & GTA entered into a supplier (BoM/Supply-chain relationship) this completely different. They supplied components (not a vendor looking for retail space to customers) to Apple and supplied to other companies as well.

----------





Again. This is not reality at all. This was not a VENDOR relationship but a SUPPLIER (supply-chain/BoM) relationship.

"get your vendor or customer into a place of no return before they get you into one" This does not make any sense at all in the case at hand. In order for this to be true, you're assuming they had a relationship beforehand - that's how a party can "get...vendor into place of no return".


Again, this is not reality. Both parties never had prior arrangements before. This was a new arrangement.



"Companies can spend millions developing a contract" again this is NOT a VENDOR relationship. Supplier/Supply-Chain BoM contracts are unique and ARE negotiated - even more so and definitely for specialized and NOT-commoditized components. The component that GTA was contracted to produce - and failed - were unique and first to market. Therefore, any pre-written or "template" contracts wouldn't relevant. The component was new - and therefore required a "new" contract. Contract signed after BOTH parties come to amicable and fair agreement for a relationship.

Well considering you don't know what we do with Walmart, you're a bit presumptious and i'd say we're more like this agreement with Apple and GTA than not.

However, I get what you're saying about that scenario and I still think a company like Apple is the one you want on your side.. GTA got butt hurt and wants to somehow make some publicity about their practices. I, for one, am not surprised Apple is strongarming.

 

[Tech198]

hehe... big boy pants..

GT's going down anyway.

Can't Apple understand this part ?

Apple says to GT "don't bother to neglect".... sounds like Apple like to be in control.

 

[collegitdept]

A regular loan from the bank or funds raised through the sale of bonds or stocks would allow the furnaces to be used for any purpose.

The fact that Apple's money can only be used for Apple's products shows precisely how "not standard" their agreement was. They weren't just using them as a supplier, they were in some sense an independent contractor except they weren't even really independent.
.

Again this is a supply chain relationship. Apple is not bank and not a venture capital firm providing funds to start-up.

Regarding restrictions on funds to be only be used for building parts for buyer - this is absolutely standard. Again think for a moment, how can it be alright for a supplier to take funds from buyer - and then use funds or build same proprietary components for their competitor?

 

[scottsjack]

My take;

A few "news" articles are completely insufficient to even begin to comment on a complicated business agreement so I am going to take the high road and just shut the heck up on this subject.

 

[collegitdept]

Well considering you don't know what we do with Walmart, you're a bit presumptious and i'd say we're more like this agreement with Apple and GTA than not.

However, I get what you're saying about that scenario and I still think a company like Apple is the one you want on your side.. GTA got butt hurt and wants to somehow make some publicity about their practices. I, for one, am not surprised Apple is strongarming.

In this case - there wasn't strongarming. They were never in a prior relationship.

Both negotiated a fair agreement, lawyers drafted a new contract, both signed.

If GTA did not feel any requirement was possible or justifiable - again they were still negotiating. Both would have to come to an agreement. Then finally once all is agreed, lawyers draft contract, and is signed.


If again, GTA still feels like demands were impossible. GTA walks away. No possibility of being strongarmed - because they had no prior relationship/dependence on Apple. GTA walks away - nothing lost - because they had nothing to lose.

 

[macfacts]

I think most people here would disagree, and anyone in big business wood laugh at what you are implying.

So what you believe is, Apple's intentions were to give $500 million to a company and purposely do everything they could to make them fail??? That's absurd!!!

Apple didn't give anything. It was a loan with many conditions. Apple had zero risk. The top guys at gtat are idiots.

 

[Tubamajuba]

Ah okay. I wouldn't say Apple is the only one in the wrong here, to be honest, but I would say they're not completely clean either. Also, I think you should day negative things about a company whenever you think them. Doesn't matter who it is.

Of course, people will respond to your negativity. That's another thing people should get used to.

Personally, I think that GT Advanced has themselves to blame, but it wouldn't be surprising to find out that their account of Apple's behavior is completely factual. Apple certainly uses their size to their advantage, and that includes a "my way or the highway" approach to dealing with suppliers. At the end of the day though, you need to say no to a contract if you have any doubts that you can put your company in a position to fulfill it- regardless of how much money you have already poured into the necessary preparations. Either way, I understand why people view Apple as being a bully in this situation.

And yes, there is always room for positives and negatives in any discussion. I just wish people could stick to what they're actually trying to talk about rather than go down the "emotional rant" route. But at the end of the day, it's an internet forum. This place is infinitely better than many other sites out there.

Either way, I can tell that you call it like you see it without regards to any sort of agenda- a quality that most people around here lack.

 

[collegitdept]

A regular loan from the bank or funds raised through the sale of bonds or stocks would allow the furnaces to be used for any purpose.

The fact that Apple's money can only be used for Apple's products shows precisely how "not standard" their agreement was. They weren't just using them as a supplier, they were in some sense an independent contractor except they weren't even really independent.

You're statements contain a complete lack of common sense.

This not buying stock. Buying stock is equity. Providing a "regular loan from a bank" - Apple is not a bank. "Funds raised through sale of bonds" - GTA did not issue corporate paper that Apple bought.

Apple did not purchase bonds in GTA and does not hold bonds from GTA.

Why? Because GTA did not raise funds for general business operations. They did not need to. The company was cash-flow and asset positive.

The only reason Apple fronted the money to GTA - was for producing specialized components for Apple at scale. If Apple were a lot smaller, GTA wouldn't need pre-payment loan from Apple to build at huge scale in the first place. They would have produced specialized components to Apple (at much smaller scale) - while again because it's standard, they wouldn't be able to supply same parts to Apple's competitors.

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Apple didn't give anything. It was a loan with many conditions. Apple had zero risk. The top guys at gtat are idiots.

Apple had the most risk actually. They pre-paid and fronted the money. The risk was the company would take the money and run (not pay). And that's what GTA did.

 

[springsup]

That was before they signed. Once the deal was struck there were no changes.

And in the end, had GT not failed, the second deal was actually better for them. Because then they owned the furnaces and having fulfilled their deal with Apple they could use them for other clients. Whereas before, when the deal was over, Apple could have taken the gear away. GT likely knew this little detail and was swayed to sign when they were still free to walk away

...except that the loan was clearly not beneficial to them as the repayments bankrupted the company.

 

[collegitdept]

Personally, I think that GT Advanced has themselves to blame, but it wouldn't be surprising to find out that their account of Apple's behavior is completely factual. Apple certainly uses their size to their advantage, and that includes a "my way or the highway" approach to dealing with suppliers. At the end of the day though, you need to say no to a contract if you have any doubts that you can put your company in a position to fulfill it- regardless of how much money you have already poured into the necessary preparations. Either way, I understand why people view Apple as being a bully in this situation.

And yes, there is always room for positives and negatives in any discussion. I just wish people could stick to what they're actually trying to talk about rather than go down the "emotional rant" route. But at the end of the day, it's an internet forum. This place is infinitely better than many other sites out there.

Either way, I can tell that you call it like you see it without regards to any sort of agenda- a quality that most people around here lack.

Although you're absolutely right about Apple and any large company using their leverage on suppliers. Those are EXISTING suppliers with prior business arrangements/relationship with Apple. So they CAN be leveraged because supplier can see their sales orders fall when Apple stops buying from them.

HOWEVER, this was completely NOT the case with Apple & GTA arrangement. This was a new partnership and GTA did NOT have prior arrangements or relations with Apple. Because of that, GTA would not see a reduction in sales orders or revenue from Apple. Therefore, there wasn't any strongarming to be done in the first place.


GTA was not strong armed!

 

[spectrumfox]

So many experts!

 

[tdiaz]

It takes two .. to sign a contract.

It's not the first business deal to go south, it won't be the last one.

 

[collegitdept]

...except that the loan was clearly not beneficial to them as the repayments bankrupted the company.

Think hard about that statement: "..except that the loan was clearly not beneficial to them as the repayments bankrupted the company"

This does not make any sense. The loan was provided after the contract was signed! Again, contract & and negotiations was about a business agreement and pre-payment arrangement because GTA needed a loan.

Also "repayments bankrupted the company" think hard about that statement as well. First GTA did not repay anything. GTA filed bankruptcy BECAUSE of free cash-flow problems - free-cash-flow issues are MANAGEMENT issues. GTA was net-positive in assets on balance sheet remember. Again they did not go bankrupt because of the loan.

Lastly - think about repayments & bankruptcy in the consumer world. How is it credit card's fault if a debtor goes on spending spree and cannot pay bills and declares bankruptcy. Then think about the same case, person declaring bankruptcy to not pay off bills even though person has more than enough assets to cover loan? If that's the case, the case is highly suspect right?