You didn’t have to look very hard last week to find evidence that times are changing in Detroit. Ford lowered expectations for ‘09 and is (finally) moving towards a smaller, more fuel efficient lineup. And although it didn’t gain a great deal of national attention, the dissolving of Plastech signals a major shift in the way American automakers will need work with, rather than against, their suppliers. Plastech, a leading maker of plastic auto parts and assemblies, filed for Chapter 11 earlier this year. Unable to turn things around, they peddled their various divisions to former competitors and auctioned their remaining pieces this week.

There were several factors that brought Plastech down, such as their lack of a diversified customer base and soaring prices for raw materials. But like a lot of Detroit suppliers, Plastech’s true Achilles heel was their long term fixed pricing agreements with the Big 3. Detroit auto makers’ ability to squeeze their suppliers is legendary. But the days of long terms fixed pricing agreements are likely over for any input that relies on volatile commodities. Those agreements may have looked good on paper, but they are unrealistic in the days of $130 oil and double-digit inflation in metals and plastics raw materials markets.

So what’s next?

The structure will vary depending on the commodities involved, but you can expect to see many of the prices automakers pay to be tied to indexes. For example, plastic resin and component contract price movements might be pegged to one of the many industry indexes. These indexes aren’t without their problems, but that added degree of flexibility in the pricing model will help suppliers deal with fluctuations in the price of their materials.

And speaking of flexibility, there will be a LOT more leeway written into the contracts. Quarterly pricing reviews will have buyers and suppliers syncing up regularly to find common ground. And agreements will look at the full cost of producing AND delivery in order to compensate for fluctuating fuel and freight costs.

Obviously a shift from strong arming suppliers to partnering with them is only part of the equation. The bottom line is…Detroit needs to sell more cars.

Bob Zieger is a Category Manager for Plastics and Raw Materials in Ariba’s Global Sourcing Organization. Bob holds an MBA from Katz Graduate School of Business at the University of Pittsburgh and spent 11 years in the plastics industry in engineering and sourcing roles.