‘Adversarial’ supplier relations threatening car manufacturers’ OEM spend, study finds

16 May 2016

Six major automakers have been urged to dramatically improve their supplier relationship management or risk feeling the impact on the bottom line after an annual study found signs their relationships with vendors were slipping.

Nissan came under particularly fierce criticism in Planning Perspectives’ 16th North American Automotive OEM-Supplier Working Relations Index.

Planning Perspectives’ president John Henke warned that Ford, General Motors, FCA (Fiat and Chrysler automobiles), Nissan, Toyota and Honda – the six firms evaluated – face losing out on major benefits which better supplier relations would bring.   

Only General Motors, which has often lagged in this field, showed significant improvement this year. Nissan dropped 19 points from fourth to fifth and, along with FCA, now significantly lags behind the other OEMs.

Ford improved by six points, but continues to hang behind Toyota and Honda, though even these two long-term leaders performed slightly worse than in previous years.

Henke said Nissan had continued with what he described as “an adversarial” and “aggressive” approach towards suppliers that it had adopted in 2014, most likely at the behest of part owner Renault.

Auto suppliers were asked whether purchasing VPs at major OEMs were working to build more trusting supplier relations. Only GM’s suppliers believed the company’s purchasing VPs and buyers were working together to build more trusting relations.

Buyer rankings at Nissan had been falling in this area for several years – along with those at FCA and Ford. But what struck Henke forcefully was the unprecedented drop in the perception that purchasing VPs at Nissan wanted to build a more trusting relationship.

“In 16 years I have never seen that kind of drop before,” he said.

At the same time suppliers reported that Nissan buyers also confirmed this impression, though less strongly.

Another part of the study looked at how aggressively OEMs were trying to achieve price reduction, finding Nissan particularly likely to use threats to withdraw business.

“However, things didn’t work out as planned,” said the report. “Nissan’s aggressive behaviour... resulted in a lower price concession contribution per vehicle in 2013 and 2014.”

The estimated year-on-year fall of around $100 in supplier price concessions or non-price benefits per vehicle could add up to hundreds of millions of dollars when applied to Nissan’s full annual output, said Henke.

A Nissan spokesman said that the company would “use the study’s insights to work collaboratively with our supply base on continuous improvement”. “Suppliers continue to play an important role in Nissan North America’s growth where we have achieved record sales and production,” he added.

GM’s vice president global purchasing and supply chain, Steve Kiefer, said he was encouraged to see the results of the study “starting to reflect our extensive efforts to nurture relationships”.

“Though we have improved, there is more work to do,” he added. “I believe we have the right tools and initiatives in place to help us build on these results and continue to foster positive supplier relationships.”

This year’s survey canvassed 647 sales people from 492 Tier 1 suppliers representing 63% of the six OEMs’ annual purchasing spend.

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