Toyota Rises, Everyone Else Falls in OEM-Supplier Relations Study

Toyota is the only automaker to improve in the 18th annual OEM-Supplier Working Relations Index, while the Detroit Three, Honda and Nissan slip.

The study, conducted by research firm Planning Perspectives and which surveyed 684 salespeople at 496 Tier-1 suppliers on their relations with the Big Six U.S. automakers, sees Toyota’s score go from 328 last year to 333 this year.

Suppliers rate Toyota higher than FCA, Ford, General Motors, Honda and Nissan based on communication that is open, honest, timely and effective.

Toyota also is more likely to resolve tooling cost issues fairly and equitably, say salespeople surveyed this year.

“They’re just basically nice people. So is Honda,” John Henke, president-Planning Perspectives, tells WardsAuto in an interview here as to why the North American purchasing operations of the two Japanese automakers consistently score at the top.

However, Honda does fall slightly year-on-year, from 319 to 313, a result, Henke says, of the No.2 Japanese automaker hiring new purchasing employees who are not steeped in the company’s culture. Honda ranks first on its ability to resolve tooling cost and price payment cost issues in a timely manner.

After several years of sharp increases by GM, including a 40-point jump from 2016 to 2017, its working-relations score flattens, slipping three points from last year to 287.

However, GM is the automaker suppliers say they receive the most benefits from doing business with and has the highest-rated vice president of purchasing (Steve Kiefer). GM also ties with Toyota for the best-rated buyers.

Falling into the very poor/poor relations category is Ford, dropping 20 points to 250, while FCA and Nissan continue their downfall.

In its seventh straight yearly decline, FCA scores 204 on the index; Nissan, seeing its fifth consecutive loss, scores 182, an all-time low score on the study that began in 2002.

“Our suppliers have made significant contributions to Nissan’s growth and will continue to play a key role in our shared success moving forward," Nissan says in a statement released to WardsAuto. "Our management team looks forward to reviewing the full study results and are committed to identifying improvement opportunities for Nissan’s supplier relations.” 

Toyota and Honda are well known for not pressing their suppliers as hard as the Detroit Three and Nissan to reduce component prices. They also involve suppliers earlier in the product-development process.

Henke puts it down to “engineering arrogance” when asked why FCA, Ford, GM and Nissan historically haven’t involved suppliers early or often, although he says the situation has improved considerably at GM where engineering now is better linked with the purchasing process.

GM scores just below No.1 Honda and No.2 Toyota regarding early and effective supplier involvement in the OEM product-development process. Ford, Nissan and FCA placed fourth, fifth and sixth, respectively.

More than any other OEMs, FCA and Nissan still apply the most pressure to reduce prices, with both seeing worsening scores on the topic over the last year. The two also are most likely to have excessive engineering changes that extend development time and negatively impact cost and quality.

By purchasing area, FCA had the lowest score among chassis and exterior suppliers, while Nissan is at the bottom among interior, powertrain and electrical/electronics suppliers. Toyota or Honda is the best rated in all those categories, including body-in-white, a category where Ford places last.

Not surprisingly, FCA and Nissan are the second-to-last and last OEM with which a supplier wants to do business. Honda, Toyota, GM and Ford placed as the top four in that order.

The worsening overall scores in this year’s Working Relations Index are a result of supplier relations not being top of mind at automakers, Henke theorizes.

“Supplier relations in general slipped down below the radar a bit in this last year,” he says, blaming volatility in world markets and the push toward electrification and autonomous technology as distracting corporate leadership.

“Wherever there’s two groups of people together you constantly have to be thinking about the relationship,” he says.

In July, Henke will release another study, on the economic impact of poor supplier relations using fiscal-year results. Planning Perspectives already has done the math on GM, finding it could have realized an additional $167 for every light vehicle manufactured and sold in North America (due to more efficient purchasing/engineering) if it had maintained its 2017 score. As GM made and sold 2.4 million light vehicles in North America in 2017, that equates to an additional $400 million-plus in profits.

Ford would have realized $600 million in added profit had it maintained its 2017 score, Henke says.

Meanwhile, the research firm will be trying to gather intel on Tesla by querying suppliers on its mailing list about whether they would agree to be surveyed about the automaker. Henke believes Planning Perspectives’ history of confidentiality “may help” in garnering participation.

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