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GM Mends Fences with Suppliers

Nissan takes tumble in new study.

by on May.15, 2017

GM relies on parts from about 20,000 different suppliers to produce vehicles like the Chevy Bolt.

Once the scourge of automotive suppliers, General Motors has been shaking things up and improving relations with the parts manufacturers who are a critical part of the auto industry, according to a new study that ranks carmakers based on how well they work with suppliers.

Toyota and Honda captured the top two spots in the 2017 North American Automotive OEM-Supplier Working Relations Index study, as has been the norm for most of the 16 previous studies. But Nissan fell for the third year in a row while GM, long the industry laggard rose from sixth to third place this year.

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“GM’s turnaround in supplier relations is remarkable,” said John Henke, president of Planning Perspectives, Inc., which conducts the annual study, noting that the Detroit maker has improved in all five areas covered by the index, while Nissan “has dropped in all five.”

Over the years, GM has been faulted for taking an “adversarial relationship” towards suppliers. Today, that is the situation at Nissan, according to Henke. And while that may be part of a strategy aimed at cutting costs, he argues that it is having the opposite effect, “cost(ing) them tens of millions of dollars in supplier contribution to profits.”

(Nissan earnings take a tumble. Click Here for more.)

Developing a good relationship with suppliers isn’t always easy. Manufacturers like GM, Ford and Nissan have often struggled to find the best approach, often focusing on squeezing their parts producers for the maximum possible cost concessions. But there are trade-offs, according to Henke – and other industry experts.

Working with suppliers - like brake maker Brembo - pays off in the long-run, experts say.

Focusing on the bottom line may seem to make sense, but it doesn’t always save dollars. For one thing, suppliers may be less willing to share their latest technologies or work with an OEM to come up with new approaches. That can improve product design, work out problems in the manufacturing plant, and even save money.

The Index looks at sixteen different areas, including communications between automaker and auto supplier, as well as the opportunities a carmaker offers parts manufacturers to improve their own profitability.

GM improved nearly across the board, its score rising in five of six Purchasing Areas, for example. On the other hand, Nissan fell in five of six.

(GM expanding list of automotive job cuts. Click Here for the latest.)

Over the years, industry observers have contended that GM’s poor relationship with its roughly 20,000 suppliers has contributed to higher costs and lower quality.

The turnaround, Hencke suggested, came with the appointment of Mary Barra as the carmaker’s CEO in October 2014.

Supplier relations start at the top, but must be driven down to the Buyers – and effectively reinforced — to get the Buyers to change their behavior,” the analyst said, adding that such a change, “must be part of the corporate culture. Buyers will not change their behavior unless improving supplier relations is part of their performance measures.”

GM still has a long way to go if it hopes to challenge the leaders in OEM-supplier relations, according to the study. It had an overall score of 290 this year, up from a low of 163 back in 2008, when it was heading towards bankruptcy. But index leader Toyota scored 328 this year, Honda 319.

Ford actually showed a slight improvement, with a score of 270, but it slipped to fourth place, leapfrogged by GM. Fiat Chrysler Automobiles rose from sixth to fifth place, with a score of 218. Nissan lagged at 203.

The 2017 North American Automotive OEM-Supplier Working Relations Index was based on responses from 652 salespeople working with 108 Tier I automotive suppliers. Together, they account for about 64% of the money the six automakers spend on parts in North America.

(Ford shareholders and exec both frustrated by maker’s lagging stock price. Click Here for the story.)

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One Response to “GM Mends Fences with Suppliers”

  1. JAE says:

    Maybe my copy needs to take a look at what GM is doing or perhaps I need to move to GM…