Visteon Corp. may have killed a ``pay to play'' concept to sort out suppliers, but it still is intent on cutting its supply base, looking at reducing its injection molders to 35 from an existing list of 180 companies.
Consolidation must take place, said Jonathan Maples, vice president of quality and materials management for Visteon, and the company intends to find the strongest firms capable of working on product development and delivery.
``Our next phase is to create alliances with our supplier partners through long-term agreements,'' Maples said Jan. 13 as part of a panel at the Automotive News World Congress in Dearborn. The companies selected will receive four- to five-year contracts, Maples said.
Visteon raised concerns in 2003 when request-for-quote paperwork was sent to injection molders asking companies to agree to some upfront givebacks for consideration in bidding. The Dearborn-based supplier later killed the proposal, with Maples still referring to the incident as a ``misnomer or misunderstanding.''
Moving forward, he said, Visteon is seeking out strong companies that put money back into product development and help bring in new systems that consumers want, while filling key slots in the supplier's long-term strategy.
``We look for suppliers that can complement and work with us on a collaborative basis,'' Maples said. ``We need to move out of the adversarial practice we may have seen and drive ways to work together to achieve for our customers.''
About half of Visteon's suppliers work with three- to five-year contracts, he said. That percentage may increase.
By comparison, Toyota Motor Manufacturing North America Inc. in Erlanger, Ky., maintains a one-year contract with its suppliers, but there is very little turnover from year to year, said Simon Nagata, vice president of purchasing.
Toyota has extensive hands-on relationships with its suppliers to ensure each firm understands what is expected and desired of the other. Benchmarking and lean manufacturing audits are done not to cull the herd, he said, but to help companies understand what they must improve.
There is a wide difference between the approaches taken to purchasing by the traditional North American auto industry and its Japanese counterpart, said David Nelson, vice president of global supply management for Troy, Mich.-based Delphi Corp. and a former purchasing executive for Honda of America Manufacturing.
Traditional buying in North America and Western Europe brings in a multitude of potential suppliers to compete against each other to find the lowest-cost winner, he said.
Japanese companies tend to pick one or two key companies, then work with them to find ways to lower costs.
``There are two different cultures in purchasing - the hunter and the farmer,'' Nagata said. ``We are trying to find the best balance between hunter and farmer.''
While some work will continue shifting to low-cost, low-wage countries such as China, there is no guarantee that all contracts will find their way there, Nelson said. Transportation issues, technical demands and a variety of other costs could keep the work in North America.
In one case, he said, Delphi bid on a part for production in Asia, but ended up spending its entire travel budget before the program even launched, buying airline tickets to get engineers back and forth between the countries.
``You start with the price-to-price comparison, then add on all the hidden and not-so-hidden costs,'' Nelson said.