By: Catherine Kavanaugh
January 22, 2014
DETROIT — As president of the Original Equipment Suppliers Association (OESA), Julie Fream represents 450 businesses providing the materials, components, systems and services that support North American vehicle assembly plants.
Or, as she likes to call the trade group's members: "the suppliers that provide two-thirds of the value of a vehicle."
At a time the auto industry is taking on new challenges — lighter weight, higher technology, more fuel efficient vehicles — Fream is calling on automakers and suppliers to improve working relationships with those further down the supply chain.
"OESA is embarking on a concentrated effort to improve the collaboration and transparency within supplier-to supplier relationships," Fream told an audience of business representatives and international media at the 2014 Automotive News World Congress.
"This is not to say we let up on our effort to strengthen [original equipment manufacturer]-supplier relationships. We will not. However as many of us have seen during some of our recent challenges in this business, tremendous value can be unblocked when collaboration through the entire value chain is the strongest."
Fream did not get any arguments from the panelists in a purchasing and supplier session at the World Congress, held Jan. 14-16 in Detroit as the 2014 North American International Auto Show kicked off nearby.
Brian Kesseler, president of power solutions for Johnson Controls Inc., based in the Milwaukee suburb of Glendale, Wis., said his division turned to its partners to find a renewable alternative for a structural component that attaches big, cushy armrests to the floor of Ford Motor Co.'s 2014 Lincoln MKX.
The solution ended up being the use of a tree-based fiber cellulose used to reinforce polypropylene that Johnson Controls developed with lumber giant Weyerhaeuser Co. and Dearborn, Mich.-based Ford.
"That drove both light weighting and recyclability and really was an example where we worked up and down the supply chain with Weyerhaeuser, a non-traditional auto supplier, to bring that fiber in and replace polypropylene," Kesseler said.
Ford, which is launching 23 new products around the world this year, has an aligned business framework with about 100 of its major suppliers. The goal is to create collaborative relationships.
Yearly reviews with business executives are an important part of the program, said Hau Thai-Tang, Ford's group vice president of global purchasing.
"We engage them and share with them our long-term cycle plans and product strategy," Thai-Tang said. "We solicit their input around new technology and innovation they think will be a good fit with our brands."
Having clarity about what a brand stands for helps suppliers prioritize where they spend their research and development budgets, he added.
Ford also has shown it will put its marketing might behind a good idea and deploy it broadly across all products as in the case of its EcoBoost engine, which is designed to deliver power and torque in a smaller engine, which improves fuel efficiency and reduces greenhouse gas emissions.
EcoBoost is available in 80 percent of Ford's product lineup with supplier BorgWarner Inc., getting 80 percent of the turbo-charged engine orders.
James Verrier, president and CEO of BorgWarner Inc. of Auburn Hills, Mich., recalled early discussions about the high-stakes EcoBoost program.
"The first thing that was different was the tone," he said. "We heard some questions we hadn't heard before — some weird questions — like: What do you think BorgWarner? What do you think the turbo should look like? What do you think a good timeline would look like? What do you think the testing cycle should look like? And even more impressively they listened to our answers and this tone really did change things. It started to open up different levels of ways to talk to each other."
The BorgWarner team found themselves influencing the design, program, and output more.
"With that came feelings of enhanced responsibility and accountability but with a framework around more trust and more of an alliance, we felt comfortable with that accountability," Verrier said.
Still, more trust needs to be built into the supply chain, he added, particularly when it comes to forecasting demand in lean and good times to prevent production bottlenecks.
"Think of how many suppliers from four to five years ago that are not here today," Verrier said. "I think what we're seeing is most of the supply base is trying to squeeze out that last drop of capacity and run a little bit on the ragged edge. I think that's okay for the short term but for the long haul that's got to get fixed. I think some of that will be a trust factor with the OEMs and the supply base."
During the session, smaller suppliers wanted to know how they can get a chance to fill orders for Thai-Tang, who has a budget of about $90 billion. He offered a glimmer of hope at a time Ford is reducing its list of active suppliers from 3,000 five years ago to about 1,100 today to a targeted number of 750 by no specific end date.
"We want to encourage new suppliers. We want to encourage competition," Thai-Tang said.
He pointed to a Jan. 15 announcement that Ford and its top tier suppliers awarded $10.4 million in contracts to small businesses in Michigan following a summit with the Michigan Economic Development Corp.
"That's over and above the $15 billion of business we're doing in Michigan today," Thai-Tang said. "It's everyone from production parts suppliers to someone who wants to sell us cupcakes in our lunchroom to somebody who wants to maintain the tools in our plants.
"My message back to our team is we shouldn't turn anyone away and don't use this 750 long-term target as a hurdle to filter our great ideas."
James Verrier, BorgWarner CEO, Hau Thai-Tang, Ford purchasing chief, and Brian Kesseler, Johnson Controls battery division president, speak with Automotive News Publisher and Editor Jason Stein at the publication's World Congress event in Detroit.
Automotive News photo by Glenn Triest