Auto Makers Stagnant in Supplier Survey

Company culture, not the pace of industry sales or pressure to meet production demands, is what has auto makers treading water in their relationships with top-tier suppliers.

And, unfortunately, the industry is stuck in a not-so-good spot, says John Henke, president of Birmingham, MI-based Planning Perspectives, which today releases its 13^th Annual North American Automotive OEM-Tier 1 Supplier Working Relations Index Study.

“The first level of competition between auto makers isn’t the marketplace, it’s (with suppliers),” he tells WardsAuto. “Every OEM should be making sure suppliers know they want to do business with them, and not view them as competitors.”

But the Planning Perspective survey, which focuses on how suppliers view General Motors, Ford, Chrysler, Toyota, Nissan and Honda in the U.S., suggests that isn’t the case. Suppliers polled indicate there has been little improvement from a year ago in how they are treated, despite a rebounding economy that is inching U.S. sales closer to pre-recession levels.

“Whether either party is making money or not, there is no relation to auto maker and supplier relations,” Henke says, noting he had hoped to see more collaboration given the challenges facing OEMs, including government imposed fuel-economy and emission mandates.

Suppliers treated poorly are less likely to share new technologies and make investments required to support the OEM, he says.

Overall, fewer than 47 points separates the worst from the best on the WRI, compared with 301 some 10 years ago. But individual scores, which hover around 268 out of a possible 500, aren’t as good as they need to be, Henke says.

Toyota, which has lost 118 points on the WRI since 2005, remains the leader in the study, which rates auto maker and supplier relations on a point basis. Honda is in second place, followed by Ford, Nissan, GM and Chrysler.

Despite taking the top spot, however, Toyota gained only one point since last year, an indication its supplier relations are stagnating, Henke says.

Honda had the largest slide compared with year-ago, dropping a full six points to its worst score since the study began.

“I have no clue why (Honda) is dropping,” Henke says, “but the drop is so consistent across all measures of the WRI. It’s just the way they’re doing business, which is very different these days.”

Henke says Honda’s tarnishing reputation may be a sign of growing pains as the auto maker has expanded its purchasing department, or it could come from pressure to squeeze more profit out of the U.S. market.

Nissan’s score was flat with year-ago, while Ford moved up in some areas and down in others.

In a portion of the study that ranks supplier relations within particular auto maker divisions, Ford’s Electrical & Electronics group has become its highest-rated after being its lowest-rated last year.

“Maybe Ford changed a purchasing director (in that group),” Henke says. “There seems to be no consistency.”

Chrysler, ranked at or near the bottom since the study’s inception, has shown steady progress in recent years, but rose a mere two points in the latest report. There is no indication Chrysler’s slowdown has anything to do with its alliance with Fiat, Henke says.

“(Chrysler) people say they haven’t changed the day-to-day manner in the way they’re working,” he says. “Fiat hasn’t come in and said ‘Fiat does it this way.’ They’re doing it the same way.”

As a group, the Detroit Three had been on the rise in the study, which this year questioned 555 sales personnel at 441 Tier 1 suppliers. But Henke says one sales staffer polled told him, “They seem to have forgotten the help we gave them during the 2008-2009 recession, because they’re back to their old tricks.”

GM, Ford and Chrysler historically have performed poorly in the survey because of their relentless demands for price concessions, rather than collaboration to drive costs down.

Auto makers always will ask suppliers for cost cuts, Henke says, but it’s the way they go about it that makes all the difference.

“They’re making money but they want to make more,” he says. “There has always been a high level of pressure to reduce costs, but they’re doing it more aggressively today than they have in the past.”

Planning Perspectives, which only recently began to survey suppliers about German auto makers with manufacturing operations in North America, ranks BMW first, followed by Mercedes and Volkswagen.

Following two years of decline, BMW has improved in this year’s study to lead all auto makers, including the Detroit Three and Japanese.

Mercedes and VW continue to slide, however, with VW ranking dead last among all auto makers with North American manufacturing operations.

VW’s poor showing comes as no surprise, as it long has had a poor reputation among European suppliers, Henke says. “VW has imported the way they are with suppliers in Europe, and they don’t do well there. They have a controlling approach.”

Ultimately, Henke says the relationship between auto makers and suppliers doesn’t have to be perfect to be successful; it simply needs to be based on mutual respect.

“You don’t have to like one another. But if you respect one another, you can interact fairly well.”

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