Automotive suppliers reported having mixed feelings about their relationships with Detroit's three automakers as Toyota Motor Co. once again received the highest accolades in an annual study released on Monday.
General Motors Co. achieved its highest approval in the 23 years of the North American Automotive OEM-Supplier Working Relations Index from accounting firm Plante Moran that looks at supplier trust and return on investment. Ford Motor Co., meanwhile, saw the largest decrease in sentiment of the six included automakers after it separated its electrification business from its traditional operations. Stellantis NV once again was below its competitors, but saw the largest gain under new purchasing leadership after revoking a freshly instituted, unpopular supplier policy last year.
With suppliers representing 70% of an automobile's value, supplier relations have major implications on product integration, quality and cost and even economic development, said Dave Andrea, a principal and automotive strategist at Plante Moran. As automakers continue to face supply-chain snags, especially around a global shortage of microchips, strong working relationships can be valuable for finding solutions faster and avoiding production shutdowns.
"If that's not working smoothly, it's a shortage of vehicles on that top-end dealer lot," Andrea said. "The suppliers are consciously looking at who is going to be their customer going forward, because they can invest for everything."
Toyota topped the index with a score of 338, though it was down from 345 last year. Honda Motor Co. Ltd. was second at 331, down from 334. In addition to supply-chain disruptions, new joint ventures for battery plants and goals around environmental, social and governance are increasingly affecting suppliers, and that can strain smaller purchasing teams, Andrea noted.
GM was third at 297, up from 287. That is a story of "consistency and continuity," Andrea said, even as GM has had several leaders in purchasing over the past few years. The Detroit automaker instituted over-communication with suppliers during the pandemic, and internally, has managed communication with finance and engineering departments that had suppliers describing interactions and resolutions as "fair" and mutually beneficial when it came to component cost objectives or validating alternative materials if needed.
"Toyota and Honda are not easy companies to work with; they're very demanding," Andrea said. "It's the old adage that it's very, very hard to be a Toyota supplier or become a Honda supplier, because it's your business to lose. I think that's what GM is trying to get to in their own way."
With as large an organization as GM is, Andrea added, that can be a challenge.
"Success comes through collaboration and that was evident this past year as our suppliers were key in helping us effectively manage the semiconductor crisis and supporting our transition to electric vehicle production," Jeff Morrison, GM's vice president of global purchasing and supply chain, said in a statement. "The survey results underscore the importance of building strong relationships, effective communications and teamwork to not only ensure no interruptions to production but also prepare for the exciting developments coming in future vehicles."
With an index of 219, a decrease of 23 points, Ford Motor Co. fell below Nissan Motor Corp. at 225. The split last year of the Model e electrification business and legacy Ford Blue operations marked a major structural change for the automaker.
"It was communicated as if there were going to be two different organizations, two different companies, two different cultures and mindsets, and that is very difficult to pull off under one company," Andrea said. "It was difficult internally to know which side of that Ford you were on long-term, and it certainly was confusing externally with the suppliers."
Ford additionally has been open about efforts to address its warranty costs, Andrea noted. The company is seeking a 10% operating margin by 2026.
"We're working more closely than ever with our suppliers to create value through the Ford+ plan," spokesman Ian Thibodeau said in a statement. "Together, we're taking bold actions to improve quality and reduce costs."
Stellantis was at 145, up 17 points. It declined to comment on the results.
The automaker last year had instituted new North American supplier contract terms that would've required their vendors pass onto it any cost savings, resulting in backlash that forced Stellantis to retract the change. Its WRI sunk 42 points in 2022.
Stellantis appointed new purchasing and supply chain leaders, which was fruitful, Andrea said, noting the leadership particularly exhibited by the new head in North America, Marlo Vitous, even amid significant turnover in the department. Still, it can take a few years for some suppliers to experience a new bid round with an automaker to experience certain change. And it's easier to lose trust than gain it.
"Her first move was very, very clear about communication and getting out both herself as well as her direct reports to get out and visit the suppliers," Andrea said, noting part of it was loosened COVID-19 restrictions. "Significantly, she knew she had, from both sides, to go on behalf of Stellantis to tell their story, because they dropped most significantly last year, and then to hear the suppliers, and take that back. You saw from across the measures of buyer characteristics, those all improved for Stellantis."
He added that there's a difference in responses between the top end and the bottom end concerning why suppliers give discounts to their customers. For Toyota and Honda, they say loyalty. For Stellantis, it comes from fear of retaliation that the vendor could lose a contract.
It's important that automakers know they have a reliable supply base, Andrea noted, because when they need a new part, they may have to count on their vendors to make the investment for a new components plant.
"Is that the same company, the same customer that you said you only gave (a discount), because you felt retaliation? How safe is that?" he said. "Because they can move. They can go to another supplier, because that's its fear. It's not loyalty."
