GM's And Ford Suppliers Are Very Unhappy; Honda And Toyota Fare Better

GM's suppliers are not a happy lot. The relationship is at an all-time low.

In the annual study conducted by Planning Perspectives, Inc. of Birmingham, MI, 85% of GM suppliers characterize their relationship with GM as being poor and 53% of suppliers would "prefer not to do business" with the automaker or are "ambivalent" about it. In contrast, 63% of Honda's and 73% of Toyota's suppliers consider these automakers "very preferred" or "most preferred" customers.

Ford's supplier relations are at the same low level as last year while Nissan continued its positive ratings.

"This year's study shows that suppliers are continuing to shift capital investment and research and development funds to their Japanese customers and decreasing somewhat their investments in the U.S. Big Three," said John W. Henke, Jr., Ph.D., president of Planning Perspectives, Inc. More than 250 Tier 1 suppliers participated in the 2005 study.

Even as automakers pressure suppliers for price reductions, multi-million dollar cash givebacks and often do not stick to contracts, suppliers cite poor treatment by U.S. automakers as the problem and not cost pressures. Areas of contention include; supplier trust of and open communication with the OEMs, OEMs providing timely information to suppliers, degree of help the OEMs provide the supplier to reduce cost or improve quality, OEMs excessive and late engineering changes, early supplier involvement in the OEMs product development process, the OEMs giving the supplier some means to recover costs on cancelled or delayed programs, and suppliers' ability to make an acceptable return over the long term on the OEMs' business, among other criteria.

The findings point out that U.S. automakers are 180 degrees opposite from their Japanese counterparts in five key areas -- relationship, communication, help, hindrance, and profit opportunity.

"What is apparent is that the Japanese OEMs are applying continuous improvement practices to their supplier working relations just as they have done to their manufacturing processes, and as a result they continue to win the cost-quality-technology race" explains Henke.

Planning Perspectives Inc.


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