DETROIT — Suppliers that meet automakers' demands for price cuts probably could get along fine by just saying no, a survey shows.
Suppliers also rate General Motors Corp. and Ford Motor Co. as the most demanding customers when it comes to price cuts, according to a survey by International Resource Network Inc. Chrysler Corp. and the transplants, which encourage long-term relationships with suppliers, were viewed as more reasonable.
Not only do suppliers face tough price negotiations when landing new business, but they face ongoing demands to cut prices during the lives of contracts. How suppliers and automakers handle these negotiations is a major test of will and nerve.
``We call it the adult game of chicken,'' said Kathy Bolhous, an International Resource Network vice president. ``Who's going to blink first?''
International Resource Network of Grand Rapids, Mich., specializes in strategic planning and production forecasting for suppliers. It compiled its results from 217 surveys returned from 76 companies. The company plans to conduct the survey each year and expand its scope.
The survey, in which suppliers were granted confidentiality, generated few surprises. But it quantifies a trend that has largely been reported anecdotally. Few suppliers are willing to publicly criticize original equipment manufacturers' purchasing policies when contracts are on the line.
``Unfortunately, no one wants to talk about it because they're afraid of repercussions from the OEMs,'' Bolhous said.
Overall, 74 percent of suppliers that refused to cut prices did not lose business. Only 9 percent lost business, while 17 percent gained business with a customer after refusing to cut prices. Ford, suppliers said, was most likely to take business away from parts makers that did not meet its requests.
Only 36 percent of suppliers that agreed to the full price cut request saw their business increase. Most suppliers in this category saw no change. The cruelest result: Some 5 percent of suppliers in the survey saw their business decline after meeting the automaker's demand.
Among the Big Three, transplants and Tier 1 suppliers, Chrysler Corp. was least likely to ask for price cuts. Bolhous said that is because the automaker uses its Supplier Cost Reduction Effort program to share cost savings cooperatively.
Transplant suppliers were most likely to meet 100 percent of their customers' price-cut demands. Ford suppliers were least likely.
Bolhous also noted that large Tier 1 suppliers, which are becoming global, rapidly are asking their own suppliers for annual price cuts. Large suppliers also need efficient supply networks.
``That's a key issue for the big Tier 1s. They're just now articulating their strategy,'' she said.