01 September 2008 | Paul Snell
Relationships between major US and Japanese automotive firms and their suppliers have deteriorated significantly in the past year, according to a new report.
The 2008 annual Working Relations Index (WRI), compiled by John Henke, CEO of consultancy Planning Perspectives, found that supplier relations at Toyota, Honda, Nissan, GM and Chrysler were all worse than last year.
Ford was the only auto firm to improve its relations, by 17.9 per cent, to become the highest-placed US manufacturer in the index.
Toyota maintained its overall position as the preferred carmaker for suppliers to deal with, despite an 11.6 per cent drop compared with last year. Chrysler, who were ranked last of the six firms, was described as being in "free fall", suffering a 19.1 per cent fall since 2007.
"We've never seen such dramatic year-on-year shifts in the rankings," said Henke. "This could signal a new chapter in OEM [Original Equipment Manufacturers] supplier relations."
The WRI surveyed 284 tier-one vendors and measured the automotive firms across 17 areas, including supplier trust, communication and involvement in the development process.
The three Japanese manufacturers - Toyota, Honda and Nissan - ranked far higher in four key areas, including concern for supplier profit margins, than their US counterparts.
The survey results will make painful reading for Chrysler, which is trying to improve its SRM performance under new CPO John Campi. Henke said: "The two-year drop of worsening supplier relations at Chrysler has resulted in suppliers treating Chrysler as Chrysler has been treating them. In today's poor economy and intense competitive environment, such behaviour toward suppliers just doesn't make sense."
Speaking at Chrysler's annual supplier conference last month, Campi explained his plans for improvement. "I'm dedicated to building supplier relations because I'm convinced that's the number one issue we have to deal with in this industry," he said.
He added that he would remove cost and technology from the balanced scorecard for supplier evaluation, leaving only quality and on-time delivery.
But according to Henke, CPOs will need to go back to basics to make meaningful change. "Supplier working relations within each OEM vary among the various purchasing areas, indicating that it is OEM personnel who have the day-to-day responsibility of working with suppliers that are the primary determinants of a company's supplier relations.