Trust a Must: Big 3 Need to Follow Toyota's Purchasing Lead

If you want to be the best, copy the best.

That may be the way to go for the U.S. Big Three when it comes to cultivating relationships with suppliers.

According to recent surveys, parts makers don't get along as well as they should with General Motors, Ford and Chrysler, and that may be costing the Big Three money and threatening their stakes in the U.S. auto industry, one analyst says.

Planning Perspectives, a Michigan consulting firm that annually surveys North American suppliers on attitudes toward their customers, says the satisfaction gap between the U.S. Big Three and their Japanese competitors is alarmingly large.

Toyota, for example, rated 415 points on the Planning Perspectives scale, compared with 114 for GM, 157 for Ford and 196 for Chrysler. Both Honda (375) and Nissan (298) easily surpassed the industry average of 259.

Just how far will the Japanese go to get along with parts makers?

Earlier this year Toyota North America took the unusual move of creating a Supplier Relations division to “eliminate unnecessary burdens” it was placing on parts makers.

“There's a right way to do business, and we want to sustain the supply base over the long-term,” explains Sig Huber, who heads up the new department. “We hope we are setting the right example for the rest of the industry.” (See related story: Toyota Gives Voice to Suppliers)

Big Three purchasing managers may roll their eyes at the thought, but if a company as successful worldwide as Toyota thinks there's a payoff in such tactics, then maybe there is.

Henke agrees, saying, believe it or not, cordial supplier relationships lead to lower, not higher, costs. Auto makers get better quality parts, more support from their suppliers and increased access to new technology, he says.

“This is the point (the Big Three) don't fully believe: They could substantially reduce costs by having a good relationship with their suppliers,” Henke says.

The play-nice approach doesn't mean the Japanese don't apply pricing pressure, suppliers say.

The difference is the level of trust. Suppliers want auto makers to share savings, cover costs if a vehicle program is cancelled and, in a nutshell, treat them fairly, Henke says.

Apparently that happens more often with the Japanese than the Big Three.

For their part, Big Three purchasing execs say they do benchmark their competitors, but agree they may have a ways to go.

“It is not easy,” says Ford purchasing chief Tony Brown. “It takes a long time to change…how people or companies perceive a relationship.” (See related story: Brown: 'Nothing Ultimately Is Out of Play')

But they better hurry.

“If the domestics don't look soon at their supplier relationships, then within 10 to 15 years the structure of the North American automotive industry is going to change, and the Big Three are going to have a dramatically reduced role,” a frustrated Henke warns.

“In the marketplace that exists, so many products are competitive that…the company with the strongest supply chain is the one that will survive.”

For the Big Three, which have stepped up quality and productivity efforts to match the Japanese, it may be time to follow their purchasing lead, as well.

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