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Why Do Suppliers Prefer Working With Japanese Car Companies?

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Cleveland Engine Plant  (Photo by Shaun Heasley/Getty Images)

Cleveland Engine Plant (Photo by Shaun Heasley/Getty Images)

jeffgilbert Jeff Gilbert
Automotive reporter for WWJ Newsradio 950 and CBS Radio News....
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BIRMINGHAM, MI — (WWJ) The domestic three car makers are starting to slip behind their Japanese counterparts again when it comes to having a good relationship with their suppliers.

(Planning Perspectives photo)

(Planning Perspectives photo)

“The Japanese OEM’s–Honda, Nissan and Toyota– have improved their relations, while at the same time, the domestic OEM’s–GM, Ford and Chrysler– have gone down very slightly, but–basically–have continued in that static mode,” said John Henke, president and CEO of consulting firm Planning Perspectives.

The study, which has been done for 14 years, had shown domestic car companies closing the gap in recent years. In fact, recalls and natural disasters had caused Japanese car makers to slip some, at a time when the domestics were gaining.

However, Henke says in the past year, the Japanese have regained their footing, while the domestics haven’t really moved the needle.

“Having good supplier relations is not an easy task,” said Henke. “There’s a lot of work to it, simply because of its complexity and the need to address so many different issues.”

Among the findings, in a summary of the “2014 North American Automotive – Tier 1 Supplier Working Relations Index® Study”:

  • Toyota’s and Honda’s efforts to improve supplier relations have paid off as they have regained their momentum and are ranked one and two, respectively, while extending their lead. Honda is the “most preferred” customer among the six OEMs.
  • Nissan, the second most improved overall following Toyota, has taken over third place from Ford.
  • After showing no real improvement in supplier relations for four years, Ford has slipped back to fourth place, having been passed by Nissan.
  • For the first time in six years, Chrysler’s overall ranking in supplier relations has fallen and the company is now ranked fifth, only one point above GM.
  • In spite of its recent efforts to improve supplier relations, GM has been displaced by Chrysler and has fallen into last place overall among the Big Six.
  • If the Big Three German automakers were included, BMW would be second overall, while Mercedes would be well below GM and Volkswagen would be in a very distant last place by a wide margin.

Ford, GM and Chrysler have all stressed the importance of working closely with suppliers. Henke stresses that they are not abandoning that goal.

“We know that they are working. They are just not working as well as the Japanese.”

Henke says the results of this year’s study could serve as a wake-up call.

The study found a number of areas where there’s been some change:

  • Of the Big Six automakers, Honda’s and Toyota’s VPs and buyers are rated number one and two, respectively, in working to build more trusting supplier relations, and their buyers are being the most transparent among the OEMs in providing suppliers information. At both companies, the VPs and buyers are the most highly rated of the OEMs.
  • At Nissan, the purchasing VP is seen as actively working toward building more trusting relations, and Nissan buyers are ranked higher in working to build trusting relations and in information transparency than the buyers at the US Big Three.
  • GM’s purchasing vice president is also highly ranked in building trusting relations, following Toyota, but GM buyers are ranked very low in working to build trust and in being transparent when providing suppliers information suppliers need – only slightly above Chrysler.
  • Efforts of Chrysler’s purchasing vice president to build more trusting relations are at their lowest level in two years and trending downward. Chrysler buyers are ranked the lowest of the Big Six in building trusting relations and in information transparency.
  • Ford’s purchasing vice president is ranked last in building trusting relations but he is new to his position and hasn’t had time to fully establish himself. However, Ford buyers lead Chrysler and GM in their efforts to build trusting relations and in supplier information transparency.

Having good relations with suppliers, Henke says, makes sense for major car companies. That was underscored by Toyota’s record $17.9 billion profit last year.

“It’s really not surprising that they also have good relations,” says Henke. “We have found that there is a very high correlation between very good relations and the contributions suppliers make to the profitability of a company.”

Connect with Jeff Gilbert
Email: jdgilbert@cbs.com
Facebook: facebook.com/carchronicles
Twitter: @jefferygilbert

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