Relations between automakers and suppliers are deteriorating largely because of intensifying cost-cutting demands, according to a report. Vehicle manufacturers are looking for annual price decreases as high as 10 percent, partmakers revealed in the 2014 Global OEM-Supplier Relations Study conducted by IHS Automotive.
“With few exceptions, even the best-performing carmakers have become more stringent on controlling costs in 2014, signaling a general shift for the automakers toward greater cost focus and more aggressive ways to capitalize on their negotiation leverage with suppliers,” lead author Matteo Fini said in the report.
The standard annual price reduction by automakers is about 2 percent to 3 percent, but IHS says it is not uncommon for them to seek cuts of 5 percent or more.
“Suppliers seem to accept the notion that they have to find innovative ways to generate savings on a year-over-year basis. However, they find it difficult to accept that they receive little or no support from the OEMs in doing so. This lack of support often results in strained relations between the two parties,” Fini said.
‘Nitty-gritty factors'
He said those savings are not always being pursued collaboratively.
“Expanded product liability guarantees, attempts to put more of the financial burden of recalls on suppliers and such ‘nitty-gritty' factors as reduced levels of compensation for raw material cost variations and reimbursement on tooling are also having a negative influence on the supplier-OEM relationship,” Fini said in a phone interview.
“In some commodity type areas, OEMs are becoming much more demanding. They clearly consider their bigger platforms lead to higher volumes and this gives them much greater leverage with suppliers,” he said.
He highlighted Volkswagen Group and Renault-Nissan as two automaker groups identified by suppliers as being particularly demanding.
Toyota, BMW on top
The annual report also names the top automakers to work with based on feedback from suppliers. Toyota tied for first with BMW, both earning 627 out of a possible 1,000 points. BMW, however, was the more consistent performer of the two across regions. It took first place in North America and second in both Europe and Asia, making it the only automaker to secure a top-three position in the world's three largest markets.
The top two, however, did not score as well as they did last year. Both BMW's and Toyota's global ratings remain significantly below their SuRe index scale highs (712 for BMW in 2006 and 697 for Toyota in 2007), providing further confirmation of deterioration in automaker-supplier relationships.
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