More Supplier Survey Stories A rash of bankruptcies have cast a dark shadow across the automotive supply community, but fear of additional filings appears to be more acute among auto maker employees.

The Ward's 27th Annual Supplier Survey finds OEM participants more prone to question their employers' financial security than their supplier counterparts.

Nearly a third of OEM respondents expressed concern their companies someday may declare bankruptcy, compared with 22% of supplier participants.

Likewise, more than half of OEM respondents say they are more fearful of the possibility of bankruptcy this year than they were in 2004, compared with 43% of supplier participants.

With Tower Automotive Inc., Collins & Aikman Corp. and Intermet Corp. recently falling under the Chapter 11 cloud, the weariness in the supplier ranks easily is understood. (See related story: OEMs Won't Coddle Bankrupt Suppliers)

But among OEMs, the U.K.'s MG Rover (2005) and South Korea's Daewoo Motor Co. (1999) are the only major auto makers to go belly-up in many years. The uneasiness likely reflects concerns about the financial stability of Ford Motor Co. and General Motors Corp., which have suffered significant market-share and production cuts.

The OEM sample, however, accurately reflects the North American industry at large and correlates directly to vehicle-production market shares in the region.

For instance, GM and Ford produced 32% and 21%, respectively, of the new vehicles in North America in 2004, so the OEM sample in the survey follows the same percentages.

In another unexpected finding, the survey indicates Detroit's Big Three recognize they have severe problems with supplier relations, as 66% of OEM respondents foresee a time when suppliers refuse to do business with the domestic auto makers.

Conversely, less than 40% of supplier respondents envision a time when their companies no longer work for the Big Three. (See related story: GM, Ford Hurting From Poor Supplier Relations)

Several OEM respondents seem empathetic with suppliers, citing “larger profit margins when dealing with foreign competitors” and “too many years of 'gun to the head' tactics” as reasons not to do business with the Big Three.

Supplier respondents may seem less downbeat about prospects with the Big Three, but their written comments still reflect a strong sense of frustration.

“We cannot afford to bribe ourselves into a job that requires us to operate at a loss,” says one supplier respondent. “Non-Big Threes seem to have better relationships with their suppliers and reach longer-term business agreements,” says another.

The survey reveals some of these hard feelings stem from the belief that suppliers hold out on offering the Big Three their best technology when “unreasonable” price cuts are demanded.

Some 62% of OEM respondents believe suppliers shortchange Detroit auto makers because of cost issues, while only 40% of supplier respondents agree to holding out.

“We always offer technology – they (the Big Three) don't always take it,” says one supplier respondent. “It requires some of our best technology just to keep the (profit) margins,” says another.

Timeliness of payments for goods or services rendered is another source of animosity for the Big Three and their suppliers, according to the survey. Nearly half of both OEM and supplier respondents agree the Big Three auto makers are slow to pay up for past business.

In contrast, only 14% of OEM respondents and 10% of supplier respondents admit foreign-based auto makers are tardy in making payments.

Supplier: Foreign-based auto makers are slow to pay my company for goods or services rendered.

OEM: Foreign-based auto makers frequently are slow to pay suppliers for goods or services rendered.

Supplier % OEM %
Agree 9.8 14.4
Disagree 25.2 13.8
Not sure 62.2 68.9
No answer 2.8 3.0

Supplier: The quality of products my company ships to Detroit auto makers declines each time a price cut is demanded.

OEM: The quality of products my company receives from suppliers declines each time a price cut is demanded.

Supplier % OEM %
Agree 18.9 24.6
Disagree 60.8 31.7
Not sure 17.5 40.7
No answer 2.8 3.0

Supplier: Big Three auto makers frequently are slow to pay my company for good or services rendered.

OEM: Big Three auto makers frequently are slow to pay suppliers for good or services rendered.

Supplier % OEM %
Agree 49.0 49.7
Disagree 8.4 10.2
Not sure 39.9 37.7
No answer 2.8 2.4

Supplier: Can you foresee a time when your company no longer does business with the Big Three?

OEM: Can you foresee a time when some suppliers refuse to do business with the Big Three?

Supplier % OEM %
Agree 38.5 66.5
Disagree 45.5 18.0
Not sure 14.0 12.6
No answer 2.1 3.0

Supplier: As the Big Three lose market share and production volumes, my company is better able to resist their price-cut demands.

OEM: As the Big Three lost market share and production volumes, suppliers are better able to resist price-cut demands.

Supplier % OEM %
Agree 11.9 29.9
Disagree 55.2 41.3
Not sure 28.7 25.7
No answer 4.2 3.0

Supplier: Detroit auto makers have become so aggressive in their price cut demands that my company no longer offers them its best technology.

OEM: Detroit auto makers have become so aggressive in their price cut demands that some suppliers no longer offer them their best technology.

Supplier % OEM %
Agree 40.6 62.3
Disagree 37.1 14.4
Not sure 20.3 21.6
No answer 2.1 1.8
Is your company outsourcing other activities besides manufacturing?
Supplier % OEM %
Yes 47.6 67.1
No 36.4 10.2
Not sure 12.6 21.6
No answer 3.5 1.2
If yes, what?
Supplier % OEM %
Engineering 47.1 68.8
Design 52.9 50.0
Research & Development 29.4 39.3
Testing 39.7 26.8
Other 19.1 30.4
No answer 1.5 3.6
Base = Respondents whose company is outsourcing other activities. Percentages may reflect multiple ansers.
Is your company outsourcing work that you once considered core activities?
Supplier % OEM %
Yes 48.3 52.7
No 40.6 30.5
Not sure 10.5 15.6
No answer 0.7 1.2
Has your company benefited financially from the movement of jobs to low-cost regions?
OEM %
Yes 42.5
No 11.4
Not sure 40.1
No answer 6.0
Can your company remain competitive by keeping its manufacturing operations in the U.S.?
Supplier % OEM %
Yes 42.7 47.3
No 26.6 16.8
Not sure 30.8 34.7
No answer 1.2
Has your company moved any U.S.-based manufacturing operations to low-cost countries in the last year?
Supplier % OEM %
Yes 55.9 49.7
No 37.8 31.1
Not sure 6.3 18.6
No answer 0.0 0.6
Do you know anyone personally who lost a job within the past year because of outsourcing to a low-cost country?
Supplier % OEM %
Yes 48.3 35.3
No 44.1 55.1
Not sure 7.0 9.6
No answer 0.7
With so many jobs being lost overseas, U.S. auto workers need the UAW now more than ever.
Supplier % OEM %
Agree 10.5 24.0
Disagree 72.7 58.7
Not sure 15.4 17.4
No answer 1.4
There is room for suppliers to make further price cuts while being profitable.
Supplier % OEM %
Agree 13.3 29.3
Disagree 55.9 22.8
Not sure 28.7 45.5
No answer 2.1 2.4
My company seems more interested in moving blue-collar manufacturing jobs than white collar/professional jobs overseas.
Supplier % OEM %
Yes 46.2 24.6
No 31.5 45.5
Not sure 21.0 29.9
No answer 1.4 NA
How many manufacturing jobs has your company created in the U.S. during the past two years?
Supplier % OEM %
None 37.8 45.5
1-49 20.3 1.8
50-99 14.7 1.2
100-499 14.0 6.0
500-999 2.8 8.4
1,000 or More 2.8 18.6
No Answer 7.7 18.6
In which country or region of the world is your company most eager to expand operations?
Supplier % OEM %
China 60.8 81.4
India 4.2 10.2
Mexico 5.6 7.8
Eastern Europe 7.7 1.2
South America 16.8 1.2
Other 11.9 3.0
No answer 6.3 5.4
Note: Percents may reflect multiple answers.
Do you feel secure in your current job?
Supplier % OEM %
Yes 64.3 65.9
No 32.9 32.9
No answer 2.8 1.2
Are you considering leaving the auto industry?
Supplier % OEM %
Yes 42.7 22.8
No 55.9 76.0
No answer 1.4 1.2

msutton@primediabusiness.com