DETROIT APPEARS TO HAVE GOTTEN THE message.
In releasing its annual survey of Tier 1 suppliers, Birmingham, MI-based Planning Perspectives says, and quickly are closing the gap with their Japanese rivals on the firm's OEM-Supplier Working Relations Index that measures how well parts makers and the top six North American vehicle producers are getting along.
Planning Perspectives and other analysts long have contended healthy supplier relationships are key to building high-quality, innovative and low-cost vehicles, which in turn has a direct and positive impact on auto maker profitability.
But the Detroit Three have been slow to shake a price-squeezing culture of mistrust that has made them the least favorite business partners of the Tier 1s. In 2002, roughly 140 points separated GM,and from top-ranked on Planning Perspective's WRI, and that gap had widened even further as of 2006.
However, new data, based on a survey of 540 sales personnel at 415 Tier 1 suppliers, show the Japanese have fallen back closer to the pack, while the Detroit Three have gained ground, leading Planning Perspectives President and CEO John W. Henke Jr. to believe the domestic auto makers finally have turned a corner.
“In these last couple of years, they've gone light-years,” Henke tells Ward's in an interview. “I am incredibly encouraged. There's a whole raft of data that shows companies that have good supplier relationships are better off economically.”
Planning Perspectives rates Ford best among the U.S.-based auto makers in the 11th annual survey, scoring a 271 on the 500-point index. That's up from 191 in 2008 and positions it ahead of(247) for 2011. GM is next, at 236, up from 163 three years ago, followed by Chrysler at 221, vs. 162 in 2009.
still tops the charts by a healthy margin, though its 327 rating is well down from its peak of 415 in 2007. , rated No.1 the past two years, also has been on a steady decline, with its still-second ranking of 309 well below its 380 rating four years ago.
The survey looks at 17 key parameters in supplier-OEM relations, covering such broad topics as the level of trust, communication, OEM assistance, OEM road blocks and profit opportunities. And drilling below the surface data reveals Detroit still has some work to do.
While improving dramatically over the past four years, roughly half the suppliers surveyed still say they have “very poor” or “poor” working relations with Chrysler (56%), GM (52%) and Ford (44%).
The Detroit Three also score well below the Japanese on the timeliness and breadth of communication, and suppliers would much rather share new technology with Toyota,and than GM, Ford and Chrysler.
Henke credits upper management at the Detroit Three with driving change that is triggering better scores, but says more time is needed for that message to filter more effectively down through the ranks of front-line purchasers.
Although Chrysler has recorded the biggest improvement of any of the Detroit Three over the last couple of years, Henke says that's a reflection of how badly supplier relations had eroded under private-equity ownership prior to the auto maker's bankruptcy.
Henke blames financial pressures for lowering Toyota and Honda scores in the last couple of years.
“They've been challenged with the downturn of 2008,” he says. “There's been increased pressure on getting profits out of North America. So you see a hint of more ‘adversarialness’ in getting price cuts out of suppliers.”
Toyota's quality scandal also has had a negative impact, he adds, because the auto maker was regaining lost ground on the Planning Perspectives WRI prior to the sudden-acceleration controversy that forced the auto maker to recall some 8 million vehicles in the U.S.
“But I think they've bottomed out and are on their way up,” Henke says.