General Motors is improving its supplier relations, but it’s still behind Toyota, which is the preferred among six automakers to deal with by Tier 1 automotive parts providers operating in the North American industry, according to the Supplier Working Relations Index by consulting firm Planning Perspectives Inc.
Results of the 17th annual study show that GM has jumped to third place – its highest level ever in the history of the study – ahead of Fiat-Chrysler US, Ford and Nissan, which now is in last place. Nissan's supplier relations have dropped for the third straight year since 2014 when it was in third place.
Ford, in spite of a slight improvement this year, is now ranked fourth. Fiat-Chrysler continues its downward slide, but is in fifth place because of Nissan's poor performance, according to the document. Toyota and Honda still hold first and second place, respectively, while continuing their slow downward slide in the annual rankings.
"GM's turnaround in supplier relations is remarkable," said John Henke, president of Planning Perspectives, Inc., which conducts the annual study, "and 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", Henke added.
The study scores automakers on 16 variables, which fall into five broad areas: OEM Supplier Relationship, OEM Communication, OEM Help, OEM Hindrance (reverse measure), and Supplier Profit Opportunity.
Of the other four automakers, Ford's ranking improved slightly with small gains in Supplier Relationship, Communication, and Hindrance, but it declined in OEM Help. 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 Supplier Profit Opportunity, improved only slightly in Hindrance, but fell in Help.
The significant differences between GM and Nissan extends down to their respective purchasing areas. For the purposes of the annual Working Relations Study, an automaker's purchasing function is broken into six areas: body-in-white, chassis, electrical/electronics, exterior, interior and powertrain.
Here again the scoring is consistent. GM improved in five of the six Purchasing Areas, while Nissan fell in five of the six.
Of the other four automakers, Honda had steep declines in body-in-white and exterior, a slight decline in chassis and was flat in the other three. Toyota had a significant improvement in electrical/electronics and a small gain in powertrain, while dropping in the four other areas. Ford fell in powertrain, chassis, and interior; had a slight gain in body-in-white; and significant gains in exterior and electrical/electronics. FCA dropped in body-in-white, powertrain and interior; had significant improvement in electrical/electronics; and some improvement in chassis and exterior.
Comparing the six automakers' Purchasing Area scores for 2017, Toyota is the clear leader with the highest ranking in four of the six Areas: body-in-white, chassis, electrical/electronics and interior; Honda leads in powertrain; and GM was tops in exterior. Nissan was the lowest in five of the six Areas, and FCA, lowest in one.
Another indicator of an OEMs' supplier relations is the degree to which each automaker is considered a preferred customer. This year, Ford, GM, Honda and Toyota all registered significant gains in this category, while Nissan and FCA remained relatively flat. According to the study, Honda continues to be the most preferred customer for the last three years – significantly more so than all other OEMs except Toyota, and Nissan the least preferred.
Benefits of Good Supplier Relations
Henke's supplier relations research has established that the more collaborative the supplier relations, the greater the supplier benefits received by the automaker. These benefits include more supplier sharing of innovation; greater price concessions; more supplier investment in OEM-related innovation; and greater supplier support; among others. Again, GM's and Nissan's scores this year illustrate this fact. The supplier benefit indices graph below indicates a supplier propensity to share new technology and other benefits.
Nissan, with a benefit score of only 330, is significantly behind Ford (365), GM (373), Honda (374) and Toyota (378). Ford is alone in the middle, significantly above Nissan and FCA, but below the other three OEMs.