Conflicting automotive survey results on supplier/OEM relationships

We reported on the SupplierBusiness survey earlier this week (read that article here). The results showed that after several years of gradual improvements, particularly for North American OEMs, this year shows a "marked deterioration" in their relations with suppliers. The relations between Japanese carmakers - traditionally in the top positions of the ranking - and European carmakers and their suppliers also are not very good.

Not so fast with the bad blood, according to automotive consulting firmPlanning Perspectives Inc. (Birmingham, MI). The company reported in its survey of North American automakers and their suppliers that, as a group, "the U.S. automakers continue to show steady improvement, and the Japanese automakers continue to slip." Planning Perspectives surveyed suppliers of North American automakers including the Detroit Three (GM, Ford and Chrysler), the Japanese automakers Toytota, Honda and Nissan, and for the first time included the European automakers Volkswagen, BMW and Mercedes.

"If all nine automakers are ranked as a group, Mercedes would be in first place, followed by Toyota, BMW, Honda, Ford, VW, Nissan, GM and Chrysler," said the report. "Ford, Mercedes and Toyota are first within their respective groups."

Individually however, Toyota bounced back into first place while Honda dropped to second, and Ford maintained its third place position. "Ford continues to lead the U.S. automakers in having the best relations with its suppliers, staying in third place overall, while GM and Chrysler continue to improve," said the report.

Planning Perspectives surveyed the suppliers of these nine North American automakers regarding working relations in four categories: OEM Communication, OEM Help, Supplier Profit Opportunity, and Relationship. "The Detroit Three have all shown significant improvement since 2008, with the Japanese Three remaining roughly the same," said the survey analysis.

Over the years, Planning Perspectives' study has shown that "automakers with a higher WRI (working relationship index) realize greater benefits from their suppliers such as higher quality, lower prices and more technology sharing than those automakers with a lower WRI," said the report.

Commenting on this year's study John W. Henke, Jr., the study's author and president and CEO of Planning Perspectives, said, "In the last several years the U.S. automakers, realizing that an adversarial approach to working with suppliers won't work, have been working hard to work more collaboratively with their suppliers." Henke is also a professor of marketing at Oakland University (Rochester, MI). "Given their continuing improvement over the last two to three years, it appears that they have made the internal management changes necessary to change the way their buyers are working with suppliers," he added. "They have begun to realize the benefits of trusting supplier relations, which should cause them to work even harder to be better."

This year's study seemed to bear this out. While still in last place, Chrysler has shown "significant improvement" in its WRI for the second straight year. Since 2008, Ford, GM and Chrysler have each reduced the number of suppliers ranking them as having "very poor - poor" working relations, while increasing the number the number saying they have "good - very good" working relations. "It's roughly the opposite for Toyota and Honda, with Nissan showing slight improvement."

In the commercial areas such as "OEM Rewarding High Performing Suppliers with New/Additional Business", "OEM Covers Sunk Costs When Programs are Cancelled or Delayed" and "Concern for Supplier's Profit Margin", all three U.S. automakers have shown continuing improvement in these areas. Generally the opposite is happening at Toyota, Honda and Nissan, the report noted. "Nevertheless, the traditional leaders - Toyota and Honda - continue to have the best supplier relations, still well ahead of the U.S. OEMs."

The Japanese automakers also lead the pack in "OEM Trust", i.e. their respect for suppliers' proprietary information and intellectual property such as patents and confidentiality of technical innovations. Another area is the supplier's willingness to share new technology without assurance of a purchase order.  The survey report shows that suppliers are more willing to share new technology with Honda and Toyota than with GM and Chrysler. In addition, suppliers are more willing to invest in new technology for Honda, Toyota, and Ford than they are for Nissan, GM, and Chrysler.

"With the continuing need for innovation and technological leadership on both the product side and the manufacturing side, the financial and competitive value of 'trust' cannot be discounted," said Henke. "The U.S. automakers need to move toward mutually beneficial contracts that protect suppliers' intellectual property a lot better than they're doing. If the Japanese automakers can do it, surely the U.S. automakers can do it."

The full study can be obtained from Planning Perspectives Inc. by contacting it at www.ppi1.com.