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Toyota’s turnaround with suppliers credited to 2 executives

By: David Sedgwick
AUTOMOTIVE NEWS

May 12, 2014

A troubleshooting Japanese executive and an American purchasing boss were the driving force behind a sharp improvement in Toyota’s relations with vendors in North America, concludes supplier relations guru John Henke.

A newly released survey by Henke’s consultancy, Planning Perspectives Inc., shows that after a six-year flirtation with mediocrity, Toyota’s purchasing operation has re-emerged as the North American auto industry’s gold standard.

And Henke credits Simon Nagata and Robert Young with leading the turnaround.

Nagata, Toyota’s former North American purchasing chief, returned to the United States in 2013 as head of North American manufacturing and R&D. Young was named Toyota’s North American purchasing chief in 2011.

Toyota and Honda Motor Co. were the top-ranked automakers in North America, according to 362 suppliers who rated their customers’ purchasing programs on sixteen variables.

Suppliers gave Toyota and Honda high ratings for a variety of factors, including rewards for cost cutting, compensation for canceled programs and cost-cutting flexibility.

No. 3 Nissan Motor Corp. and No. 4 Ford Motor Co. also received “adequate” ratings in the survey.

No. 5 Chrysler Group and No. 6 General Motors were rated “poor.”

The German automakers’ North American purchasing operations were evaluated separately, reflecting their lower North American production. BMW AG received a strong rating, but Mercedes-Benz and Volkswagen AG scored significantly lower than other automakers, trailing Chrysler and GM.

Toyota and Honda finished on top because they are “getting back to the basics,” said Henke, president of Planning Perspectives. “Very clearly, the Japanese have gotten their act together. They are back doing the right things that they had done before the recession.”

The Japanese automakers’ purchasing operations had been hampered by the 2008-09 recession, the 2011 earthquake in Japan and a rapid expansion of their North American purchasing staffs, Henke said.

Unlike their Japanese peers, GM and Chrysler had their scores decline slightly from the previous year. Henke faulted purchasing bureaucracies.

“Chrysler and GM need to get their buyers on board and tie their compensation to improved supplier relations,” Henke wrote. “Clearly, their buyers are the weakest link in their supplier relations.”

Despite GM’s rating, Henke says, suppliers reported that GM purchasing chief Grace Lieblein has worked hard to improve relations with suppliers following the company’s controversial revision last summer of its standard “terms and conditions” contract for vendors.

Lieblein subsequently dropped the most onerous provisions of that contract and added key vendors to GM’s supplier council. “She’s out there, pounding the pavement to get more trust with suppliers,” Henke said. “I think GM would be worse off without her.”

In a written statement, Lieblein told Automotive News that she is determined to improve GM’s supplier relations. “We’re in the midst of a cultural change that is sweeping in nature, and the message and tone needs to start at the top,” she wrote.

Chrysler attributed its poor survey results in part to a new online vendor payment system that suffered a glitch-filled rollout last year, plus rising production levels that stressed its suppliers.

Automotive News is a sister newspaper to Plastics News. For a complete version of this story, including automakers’ 2013 and 2014 supplier ratings, see www.autonews.com.