Cleveland, Ohio – As recently as 2015, General Motors was an automaker that many suppliers avoided, coming in last in Planning Perspectives Inc.’s (PPI’s) annual survey and working relationships. Since then, the largest U.S. automaker has improved its standing dramatically while front runners Toyota and Honda have slipped.
Toyota and Honda still lead the 17th annual North American Automotive OEM – Supplier Working Relations Index Study, but GM’s is a close No. 3, meaning suppliers would rather work with in that Ford (No. 4), FCA US LLC (No. 5), or Nissan, which slipped into last place.
So, good news/bad news – GM is doing much better, and good supplier relationships as automakers increasingly rely on suppliers to provide new technology and money-saving manufacturing processes. Bad news – supplier relationships fell for four of the six major automakers.
PPI’s scale scores companies from 100 to 400, based on survey results. Scoring 100 to 200 means relationships are very poor; 200 to 250 is poor; 250 to 350 is adequate; and scores of 350 and higher mean excellent relationships.
No automaker has scored higher than 350 since 2008, and only GM and Ford posted improved relationship results in the 2017 survey – moving to 290 from 250 in GM’s case, to 270 from 267 for Ford. Toyota remained No. 1 at 328, and Honda was No. 2 at 319. Toyota’s most-recent peak was in 2015 at 336; it scored 367 in 2008. Honda’s recent peak was also 2015 at 330; 359 in 2008.
“GM’s turnaround in supplier relations is remarkable,” said PPI President John Henke. “The reason for their dramatic improvement – and Nissan’s fall – is easy to understand. GM has improved across the board in all five of the key areas that comprise the Working Relations Index ranking, and Nissan has dropped in all five. While both companies have had significant cost-cutting programs in place for the last two years, their programs have had opposite results in terms of supplier relations. Nissan’s adversarial approach to reducing cost has greatly disrupted relations with its suppliers, and it is safe to say that it has cost them tens of millions of dollars in supplier contribution to profits.”
PPI’s Index scores automakers on 16 variables in five broad areas: OEM/supplier relationship, OEM communication, OEM help, OEM hindrance (reverse measure), and supplier profit opportunity.
Ford’s ranking improved because of increases in communications, relationship, and (a reduction in) hindrances, but it offered less help to ensure suppliers’ successes. FCA declined in communication and help, and was flat in the other three areas. Honda dropped slightly in communication and significantly in help, but improved slightly in hindrance. And Toyota improved in communication and profit opportunity, improved only slightly in hindrance, but fell in Help.
Henke says the wide swing between GM and Nissan was especially apparent when researchers examined purchasing-department results in body-in-white, chassis, electrical systems, exteriors, interiors, and powertrain. GM improved in five of the six Purchasing Areas, while Nissan fell in five of the six.
“Every few years, an automaker will come up with some new program aimed at improving their supplier relations – but they rarely have a lasting effect,” says Henke. “Supplier relations start at the top, but must be driven down to the buyers – and effectively reinforced – to get the buyers to change their behavior with supplier salespeople. Such an effort must be part of the corporate culture. Buyers will not change their behavior unless improving supplier relations is part of their performance measures.”
About the author: Robert Schoenberger is the editor of Today’s Motor Vehicles and a contributor to Today’s Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 17 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.