By Bob Meyer

One of the nation’s top 10 home builders, Lennar Corp., is asking sub-contractors to reduce charges for work they’ve already done, i.e. reduce charges of 5% to 20% on their unpaid invoices, or face a minimum six-month ban on bidding for work.

Lennar’s reasoning, “As our customers continue to pay us a lower price for our homes, we must in turn pay you a lower price for your services.”

Lennar builds homes in 20 different states and this demand is the latest example of how falling home prices are sending ripples through the entire housing economy.

Personally, I find the tactic of asking for retroactive concessions appalling, and it could well come back to haunt them when good times return for home builders.

How could Lennar demand reciprocity from their subs in a more positive way? By thinking outside the box…like suggesting that in exchange for Lennar’s business a percentage of the bill (costs) be invested in Lennar’s publicly-traded stock.

In this way Lennar would receives something in return for giving the sub-contractor business. The subs would be happier than having to lower their bills, because they would be holding an asset that, over time, should increase in value. Secondly, as a stockholder their workmanship would be more focused, as they’d have a greater interest in Lennar’s quality product.

Every company, regardless of their size, should demand reciprocity from their suppliers/vendors. It won’t happen until you ask!

This entry was posted on Friday, January 26th, 2007 at 12:05 pm and is filed under Real Estate, Marketing, Purchasing & Financing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.