Progress stalls in automotive supplier relations

David Sedgwick
AUTOMOTIVE NEWS

Published: May 13, 2013 12:12 pm ET
Updated: May 13, 2013 12:16 pm ET

Related to this story

Topics Automotive
Companies & Associations Ford Motor Co., General Motors Co., Honda Motor Co. Ltd., Toyota Motor Corp.

DETROIT -- John Henke is a tough grader.

Henke, CEO of Planning Perspectives Inc. in suburban Detroit, says North America's six major automakers made zero progress improving relations with suppliers over the past year.

Henke, who released his annual study of 441 suppliers today, boiled his results down to informal letter grades for Automotive News.

Among the Big Six, Toyota and Honda, which traditionally enjoy the warmest relations with suppliers, both got a B. Ford got a C; and Nissan, General Motors and Chrysler all got a C- for their current relations with suppliers.

Among European automakers, BMW and Mercedes-Benz both got a B, while Volkswagen got a C-.

A skeptical Henke said: "All the top people in purchasing have been talking about how important supplier relations are. But it ain't happening. It just isn't happening."

The study, which is in its 13th year, used five basic metrics to generate an overall score -- dubbed the Working Relations Index -- for each automaker.

Those metrics were communications, profit opportunities, supplier relations, "help" (willingness to help suppliers cut costs and improve quality) and "hindrance" (late engineering changes, conflicts between engineers and purchasers, etc.).

Suppliers also judged automakers in six purchasing categories: powertrain, chassis, exterior, interior, body-in-white and electrical-electronics.

The overall scores for the Big Six automakers were bunched tightly together, a big change over the past decade, but with almost no change over the past year. They range from 297 for Toyota at the top of the list to 250 for Chrysler at the bottom.

In this year's study, Honda was the only automaker among the Big Six with a score -- which declined six points -- that shifted by a statistically significant amount.

BMW, Mercedes and Volkswagen were ranked separately because they were recently added to the survey. Hyundai and Kia were excluded because their sample size of suppliers was too small.

Toyota and Honda traditionally enjoyed the best supplier relations by a big margin, and Chrysler and GM were the worst by far.

In 2005, a 301-point chasm separated the best and worst. Then Toyota and Honda began to slide, while GM and Chrysler improved. Now, only a 47-point difference separates the best and worst performers among the Big Six, Toyota and Chrysler.

Now, none of the six big automakers is making much progress, leading to a mixed bag of pluses and minuses:

  •  Toyota and Honda were victimized by their rapid growth in North America. As both companies expanded their purchasing operations, new staffers failed to absorb the companies' culture of cooperation.
  •  Honda and Ford get their suppliers involved in product development earlier and more effectively than other automakers.
  • Toyota makes the fewest late engineering changes, a sign of disciplined product development. Chrysler makes the most, followed by GM.
  •  Suppliers are most willing to invest in new technology to win contracts with Ford and Toyota.
  • Chrysler's previous efforts to improve relations with suppliers "came to a screeching halt" after former purchasing chief Dan Knott died last year, Henke said. Knott was replaced by Scott Kunselman.

Despite Henke's tough grades, the automakers contacted last week did not dispute the accuracy of the results. Instead, they chose to look on the bright side.

Tony Brown, group vice president of Ford purchasing, said he is pleased that suppliers are willing to invest in new technology for Ford. "We are excited about this recognition," he said in a written statement.

Chrysler's Kunselman said his team was "pleased to see that our continued work to improve our operations ... is being felt by our suppliers, [but] we know we have a lot more work to do in the area of supplier relations."

In fact, Kunselman has taken some recent steps to improve supplier relations. Last November, he said Chrysler would involve key suppliers earlier in product-development projects and de-emphasize competitive bidding.

Several Chrysler assembly plants also are dispatching teams to key suppliers to help them upgrade productivity and quality.

Meanwhile, Toyota purchasing chief Bob Young said the automaker "will continue to use these results as a valuable learning opportunity to help improve our relationships and the way we conduct business."

GM purchasing chief Grace Lieblein said in a statement: "Improving supplier relationships is a top priority for GM and while we've made significant progress in the last several years, we know we have more work to do."

Automakers that enjoy the warmest relations with suppliers could have a big competitive advantage, Henke said.

As automakers strain to boost production, suppliers will invest in new technology and production only for automakers they view as good customers.

"Suppliers remember what happened in 2008, and they don't want to go through that again," Henke said. "There is no question that suppliers will choose who they will support, and it will be the automakers with whom they have the best relationships."

For more coverage on automotive suppliers and OEMs, see www.autonews.com.


Comments

Progress stalls in automotive supplier relations

David Sedgwick
AUTOMOTIVE NEWS

Published: May 13, 2013 12:12 pm ET
Updated: May 13, 2013 12:16 pm ET

Post Your Comments


Back to story


More stories

Image

Smartphone work adds 52 percent to sales for China's Eva Precision

September 18, 2014 4:37 pm ET

Growth in supplying the smartphone and automotive industries helped Chinese processor Eva Precision Holdings Ltd. push injection molding sales up 52...    More

Image

Cascade Engineering founder Keller to step down as CEO

September 16, 2014 8:33 pm ET

Cascade Engineering Inc. is undergoing a transition as President Mark Miller will also add the role of CEO, replacing founder Fred Keller, who has...    More

Image

Canadian, Mexican injection molders form auto supply joint venture

September 16, 2014 2:26 pm ET

A new automotive parts manufacturer will open in Querétaro, Mexico, through a joint venture between Canadian automotive supplier Papp Plastics and...    More

Image

Increased capacity in the US helps Zeon Chemical supply seals globally

September 16, 2014 9:46 am ET

The automotive industry continues to be one of the driving forces of Zeon Chemicals LP., which specializes in heat-resistant and oil-resistant...    More

Image

ZF finalizes deal to buy TRW, creating another global auto supply giant

September 15, 2014 1:09 pm ET

TRW Automotive Holdings, in a supply chain megadeal that has been in the works since mid-July, said Sept. 15 it has agreed to be acquired by German su...    More

Market Reports

Plastics Caps & Closures Market Report

The annual recap of top trends and future outlook for the plastics caps & closures market features interviews with industry thought leaders and Bill Wood’s economic forecast of trends in growing end markets. You will also gain insight on trends in caps design, materials, machinery, molds & tooling and reviews of mergers & acquisitions.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Thermoformed Packaging 2014 Market Review & Outlook – North America

This in-depth report analyzes economic and market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as growth strategies being implemented by thermoformed packaging companies.

Learn more

Upcoming Plastics News Events

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events