General Motors Corp. is on the path to more productive relationships with its suppliers, according to the latest survey from Planning Perspectives Inc., a Birmingham, MI, research and consulting firm.
The Working Relations Study was conducted in April and May via the Internet, and 308 Tier 1 suppliers participated. Planning Perspectives factors the responses into a 500-point scale, with zero representing an extremely adversarial relationship and 500 representing the most honest and productive partnership.
For several years, Toyota Motor Corp. and Honda Motor Co. Ltd. have achieved overall ratings in excess of 350, while Nissan Motor Co. Ltd. has lagged slightly, at about 300.
GM, Ford Motor Co. and Chrysler Group have trailed the Japanese by a wide margin. Only Chrysler has achieved a working relations score higher than 200 for the past several years, and GM consistently has occupied the cellar with the lowest ratings of any auto maker, racking up an abysmal overall score of 114 in 2005.
But not this year. GM's working relations index rating on the Planning Perspectives study jumped to 174, enough to bump Ford into the cellar with its score of 162. Meanwhile, Chrysler remains the top-rated domestic OEM, with an overall rating of 199.
John Henke, president of Planning Perspectives and a professor of marketing at Oakland University, says GM can expect steadily improving scores if its buyers continue to treat parts producers with respect.
“If GM puts in place the performance metrics for its buyers to drive behavior in a manner that is consistent with good supplier relations, then I expect their numbers will still go up,” Henke tells Ward's. “Hopefully, seeing these results will be incentive for GM to continue working harder.”
Meanwhile, Henke says Ford now has North America's worst working relations with suppliers. He says Ford has stumbled in launching its Aligned Business Framework, which was designed to solidify ties between the auto maker and a number of key suppliers for high-volume, long-term contracts. The program, launched in 2005, now has 47 participating suppliers.
“It was a brilliantly conceived plan, but unquestionably poorly executed,” Henke says of ABF.
The Planning Perspectives study shows concern among suppliers about ABF because scores from Ford's largest suppliers are actually lower than they were five years ago.
“Something really went wrong,” Henke says of ABF. “Several months ago Tony Brown (Ford senior vice president-global purchasing) acknowledged Ford doesn't have the performance metrics that should drive the behavior they want as part of ABF. If the performance metrics have been implemented, they haven't been reinforced.”
A Ford spokeswoman says the auto maker has not yet seen the Planning Perspectives study, but that it will review the results as soon as they are available.
She says Ford has been “moving forward” in implementing ABF. “Those things do take time,” she says. “I know Ford values its relations with suppliers, and we try to work with them, with the entire supply base, so we can reach our common goals.”
Although the study shows progress for GM, it also identifies significant room for improvement.
Suppliers, for instance, still do not have much trust in their relationships with the auto maker, giving it a score of 2.3 on a scale from 1 to 5, with 5 being the best. Toyota scored a 4.0, Honda a 3.9, Nissan a 3.2, Chrysler a 2.5 and Ford a 2.2, according to the study.
In addition, 71% of GM suppliers describe their relations with the auto maker as poor or very poor, compared with 14% for Toyota and Honda, 36% for Nissan, 71% for Chrysler and an alarming 77% for Ford.
Although Honda and Toyota continue to set the pace with regard to supplier relations, Henke says the two Japanese auto makers are intent on improvement.
“They can reinvent themselves and send it to a higher level,” Henke says. “They want to take improvements at their manufacturing facilities and populate their other plants worldwide with them. They have the same approach to supplier relationships.”
It is too early to predict the future of Chrysler's supplier model after DaimlerChrysler AG sells 80% of Chrysler Group to Cerberus Capital Management LP. The deal is expected to close in the third quarter.
Shortly after the deal was disclosed in early May, Chrysler's top purchasing executive, Peter Rosenfeld, announced he was leaving. He will be replaced by Simon Boag as the new executive vice president-Procurement and Supply.
Henke says Chrysler suppliers are “enthusiastically waiting for” Boag to arrive, and that the more important factor could be Cerberus' view of parts producers.
“I don't know if Cerberus understands the benefit of supplier relations,” he says. “If they do, I would expect they will continue to apply pressure for price cuts, but they will do it in a positive manner so both sides end up winning.”