Necessity Breeds Closer Bedfellows

The line between auto makers and their Tier 1 suppliers has become paper thin.

Just-in-time delivery of sequenced parts encourages suppliers to follow their customers’ global footprints.

When Mercedes-Benz built its first U.S. assembly plant in Vance, AL, Delphi and Johnson Controls set up shop in the neighborhood. Mercedes doubled its plant capacity and they followed suit.

The suppliers synchronize their dedicated facilities to Mercedes’ schedule: the lines run at the same speed, shifts and breaks are mirror images. (See related story: Synchronicity Crucial for Mercedes Supply Base )

Today, vehicle assembly and parts workers are in each other’s plants and, increasingly, in each other’s books.

For the launch of the ’06 M-Class and all-new R-Class cross/utility vehicles, Mercedes brought in key suppliers and went over their business plan in minute detail, including hiring, support, engineering, factory location and start-up plans to identify gaps prior to launch. (See related story: Mercedes Chooses Collaboration Over Confrontation With Suppliers)

Ford sends hourly workers to suppliers during launch ramp-ups to prevent glitches that could result in costly delays. Some Ford workers are being lent to suppliers a year prior to launch to help guarantee success. (See related story: Ford Feeds Suppliers Blue Collars for Launch)

Supply parks are sprouting at North American manufacturing plants.

Chrysler goes a step further, with suppliers owning, building and operating all but the final assembly line at a Jeep plant under construction in Toledo, OH.

And the turmoil in the supply industry today is forcing auto makers and suppliers to work even more closely.

When a trio of large suppliers declared bankruptcy earlier this year, GM looked at whether it should intervene and pay certain Tier 2 suppliers directly for the greater good of a healthy supply chain. (See related story: GM Studies Paying Tier 2s Directly)

Ford had to perform an intervention for struggling Visteon in North America in May, assuming responsibility for 24 of the supplier’s operations.

That left Visteon as an independent $11-billion company, compared with its former stance as a $19-billion parts maker. Former parent Ford also gave Visteon more than $1 billion in assistance.(See related story: Ford Back in Parts Business)

Now Delphi, the No.1 supplier, is warning it will seek bankruptcy protection if it cannot find relief from labor costs, and former parent General Motors is considering the supplier’s plea for financial aid.

Chrysler, meanwhile, is courting long-term partnerships with a program that rates suppliers against peers, assigning them a place on the grid based on performance in the areas of cost, quality, technology and delivery.

Those that operate in the “reward zone� earn perks such as retaining business unchallenged, right of refusal on additional business outsourced from under-performing suppliers and first crack at future business.

Chrysler already has rewarded two overachievers with contracts for the interior of an ’09 cross/utility vehicle.(See related story: Scorecards Mark New Chrysler Supply System)

Auto makers need good relations with a supply chain that only is as strong as its weakest link. The greater the co-dependence, the flimsier the wall.Â

[email protected]