DETROIT – Executives ofCorp. and Motor Co. say a kinder, gentler purchasing model is emerging for Detroit’s two most challenged auto makers, and a new study supports the claim.
Bo Andersson, GM vice president-global purchasing and supply chain, and Ann Carter,director-interior/electrical purchasing, the Americas, discuss their new supplier strategies in an open forum at the Ward’s Auto Interiors Show last week.
“Our purchasing model was not effective for Ford or its suppliers,” Carter says in explaining Ford’s new Aligned Business Framework, launched last fall.
“We have entered into long-term relationships with suppliers globally… to improve profitability for Ford and its suppliers,” Carter says.
Likewise, Andersson admits GM’s purchasing model was flawed. “We were not always the best parent at explaining what we expected,” he says. “We are making some changes within GM. Traditionally, we would throw a part over the fence to a supplier and expect to get back what we needed. We saw that did not happen.”
It was only last fall when GM and Ford announced their purchasing changes, but they appear to be bearing fruit already.
The 2006 Planning Perspectives Inc. supplier study, an annual barometer of the working relationship between parts makers and the top six auto makers, shows sizable improvement this year for GM, Ford andGroup.
Meanwhile,Motor Corp., Motor Co. Ltd. and Motor Co. Ltd. maintain their strong positions with regard to the study’s “working relations index.”
“Clearly, whatever is being done (by the Big Three) is having an impact on suppliers,” says John Henke Jr., president of Planning Perspectives in Birmingham, MI, and professor of marketing at Oakland University in Rochester, MI.
“The Big Three still have a long way to go (with supplier relations), but they are on their way,” says Henke, who also moderated the purchasing panel at the Interiors show. “Meanwhile, the transplant auto makers retain their positions – no better, no worse.”
Planning Perspectives conducted the study in March and April via the Internet and surveyed 260 Tier 1 suppliers and evaluated 1,105 buying situations.
The study reveals, however, continuing difficulties in Big Three supplier relationships.
For instance, 83% of survey respondents rate their relationship with GM as poor, compared with 73% of Ford suppliers and 60% ofsuppliers. On the other hand, 76% of suppliers rate their working relationships with as good or very good, compared with 56% for .
For the past six years, the study has found trust is lower among Big Three suppliers than those working for the transplants. Although still low, trust ratings are up slightly in 2006 for each of the Big Three, especially Chrysler, while Honda’s score reflects a significant dip.
The study also finds the Big Three applying more cost pressures on its suppliers than do the Japanese transplants. That pressure has gone down consistently for four of the six auto makers studied, while GM and Honda show slight increases.
Survey respondents also say Japanese transplants are significantly more concerned about supplier profits than are the Big Three.
But overall, Henke says modest improvements for GM and Ford in the study should not be ignored. “They are doing much better,” he says.
Likewise, in the panel discussion, Andersson says GM must do better in executing more appealing and higher quality vehicle interiors. “We’ve had the best and some of the worst interiors in the world,” he says. Now, the auto maker is shooting for excellence across the board.
“If you buy the new Cadillac SRX this summer, you will find an excellent interior and an excellent product, with essentially the same suppliers,” Andersson says. “We’re working together and trying to be clearer on the requirements.”
On the GMT900 fullsize pickup and SUV program, launching now, GM retains most of the suppliers from the outgoing GMT800 architecture, he says, adding the auto maker is spending about $2,000 more per vehicle for materials for GMT900. About half of that amount is devoted to the interior, he says.
GM is reusing existing parts and standardizing when practical. “Today at GM you’ll see some grab handles are the same; and interior lights are the same,” he says. “Our feedback from consumers is, ‘That’s OK,’ so we can spend more money on things that are more important, like (reducing) gloss levels.”
Joining Andersson and Carter on the panel was Mark Vandevelde, senior manager-North American cost planning at Honda of America Mfg. Inc.
Honda has 600 suppliers in North America. Vandevelde says he knows Honda can be a difficult customer to please, based on a recent discussion he had with a supplier that has struggled with Honda business in the past.
A key source of the problem was the supplier’s inability to fully grasp Honda’s quality, cost, delivery, development and management (QCDDM) metrics, Vandevelde says.
“This supplier struggled to perform at acceptable levels, especially in launch phase,” Vandevelde says. “There were a few rough startups.” Quoting business correctly also was difficult for the supplier.
Today, however, that supplier has turned around its operations and is better able to assess risks. Plus, its production costs have come in line with contract quotations.
“Now, their business is growing steadily with us,” Vandevelde says.
He says Honda seeks suppliers – for interiors and other sectors – capable of taking a program smoothly from design to launch. “It takes an involved, collaborative approach,” he says. “Those with a strong QCDDM approach to eliminate waste are the ones that have the best chance to be successful with Honda.”
Meanwhile, Ford appears eager to adapt much of Honda’s playbook for successful supplier partnerships.
As part of its new Aligned Business Framework, Ford has identified 20 commodities it intends to purchase globally through secure, long-term contracts. Among those 20 are five interior products: seats, instrument panels, door trim, wiring and occupant restraints, Carter says.
“This way, suppliers can make the appropriate investment and minimize risk,” she says. “We’ve talked about total cost historically and have come to realize internally we did not have the right process to deliver total cost savings. This is a new way of doing business, based on transparency and mutual trust and sharing technology.”