AKRON (June 10, 2015) — It appears that things are back to normal in terms of relations between auto makers and their suppliers.
That means that Toyota Motor Corp. and Honda Motor Co. Ltd. once again are unquestionably the customers of choice for those supplying them, while the Detroit 3 and others saw falling grades, according to an annual survey conducted by Planning Perspectives.
During the recession and ensuing years, Ford Motor Co., General Motors Co., Fiat Chrysler Automobiles N.V. and Nissan Motor Co. Ltd. had closed the gap on Toyota and Honda for six consecutive years. But in the new survey, each of these competitors fared worse than they did a year ago. On the bright side, the scores — while lower — still were significantly higher than their pre-recession scores.
The results showed that the Detroit 3 were more willing to collaborate with its suppliers during the recession, when mere survival was the top priority, but that Fiat Chrysler and GM again are looking at price cuts as the preferred methods to bringing down costs.
Toyota again was at the top of the heap, as suppliers noted the Japanese-owned firm was willing to compensate suppliers for raw material costs and ensure their financial welfare. Honda was touted for wanting to build trust with its suppliers.
For those with dropping scores, suppliers said Ford did improve its communication but the percentage of vendors saying it had good relations with Ford declined for the third consecutive year. Nissan and GM both were faulted for aggressively seeking price cuts, while Fiat Chrysler was dinged for slow payments and an unwillingness to help suppliers cut costs.
With the automotive sector continuing to go strong, car makers will need to have suppliers on board and willing to invest in capacity to ensure that needed components and systems are ready to be delivered as needed. Each of the auto firms has different means to achieve that objective.
GM recently implemented its “One Cost Model,” where some suppliers can get no-bid contracts. Ford calls its process the “Aligned Business Framework,” a program that allots 65 percent of its purchasing budget to 80 direct suppliers and 25 indirect vendors.
Whatever the name, however, it is imperative that those car makers work hard to improve supplier relations. That's because it's important to have a two-way relationship built on trust at all times, not just when the outlook is bleak.
This editorial recently appeared in Rubber & Plastics News, an Akron-based sister publication of Tire Business.