Confronted with greater demands than ever to make major investments in global facilities and in new technologies to achieve much higher corporate average fuel mileage goals, OEMs should be redoubling their efforts to develop more collaborative supplier relations in order to leverage their combined resources, according to Planning Perspectives Inc.
But according to the firm’s 2013 North American Automotive-Tier 1 Supplier Working Relations Index study, results showed no meaningful change since last year, except Honda, whose supplier relations continue to slowly drop. The annual study focuses primarily on General Motors, Ford, Chrysler, Toyota, Nissan and Honda because these six automakers comprise 77 percent of light vehicle sales in the U.S. The European 3 – VW, BMW and Mercedes-Benz – are reported separately.
“Given the challenges facing the automakers, to say this year’s results are disappointing would be an understatement,” said John W. Henke, Jr., Ph.D., President and Chief Executive Officer of Planning Perspectives Inc., Birmingham, Mich.
While still in first and second place respectively in this year’s overall Working Relations Index (WRI) rankings, Toyota’s score is virtually the same as last year with a gain of only one point, while Honda lost six points and continued its downward slide to its worst score since the study began. Ford remains comfortably in third place, followed by Nissan, neither of whom showed sustained improvement for four years. General Motors remained unchanged and in fifth place followed by Chrysler, who managed to pick up two points but remained in sixth place.
“It’s apparent that while the automakers’ top purchasing executives generally understand and support positive working relations, this support has not been translated into a consistent action plan for improvement,” said Henke. “The lack of improvement among these automakers’ purchasing areas over the past several years suggests that none of them has implemented a well-defined, focused plan to improve their supplier working relations. Or, if they have such a plan, it is not being implemented at the level of day-to-day contact with suppliers. Either way, this is not good for the OEMs or the suppliers.”
Historically, Toyota and Honda set the standard for the study. From 2004 to 2007 they performed well above the rest of the industry with overall WRI scores in the 350 to 415 point range.
Back then, the top-rated automaker, Toyota, scored 415 and the worst, GM, scored 114, with 301 points separating them. Since the recession in 2008, the two Japanese pace-setters have fallen dramatically to the 280 to 300 range, while the Detroit 3 improved to the 250 to 270 range. Today only 47 points separates Toyota at the top, from Chrysler at the bottom.
According to Henke, there are several reasons for Toyota’s and Honda’s fall and the current stagnation of the other OEMs:
- With the rapid growth of Toyota and Honda in the U.S., both companies had to dramatically grow their purchasing staffs in recent years and it became impossible to maintain the much-heralded Japanese culture with the continuing influx of new employees.
- For both Honda and Toyota, the growth in personnel in the past two years has been associated with a considerable drop in Help provided suppliers to reduce costs and improve quality; and in Communication with suppliers relative to 2004 to 2007. The profit opportunity for suppliers has also dropped in 2012 to 2013 for suppliers at both companies.
- For Toyota, suppliers indicate that the buyers have been less active in building trusting supplier relations each of the last several years.
- Honda and Ford are leveraging the expertise of their suppliers more than the other OEMs in that they involve suppliers earlier and more effectively through-out their product development process than do the other OEMs. However, Ford, Chrysler, GM and Nissan have the least disciplined engineering function in that they have had significantly more excessive/late engineering changes than Toyota for the last several years.