By Robert Sherefkin and Julie Cantwell Armstrong
Automotive News / May 12, 2003

DETROIT - Auto suppliers long have preferred to work with Japanese automakers rather than with the Big 3. Those feelings have grown even stronger.

In 17 measures ranging from trust to perceived opportunity to make acceptable profits, Japanese automakers consistently outperform U.S. automakers, according to an annual survey of supplier attitudes toward the six biggest auto manufacturers in North America.

What's more, the 2003 survey shows Toyota, Honda and Nissan climbing even higher in suppliers' eyes. Ford Motor Co. and General Motors slipped, while the Chrysler group gained slightly. (See box, Page 50.) Generally, the Japanese are known for taking a more cooperative approach with their suppliers than the Big 3.

The results, to be released today, May 12, are certain to add fuel to one of the most contentious questions facing the industry: How much does the nature of an automaker's relationship with its suppliers hurt or help the automaker's performance? The issue has become more important as the Big 3 continue to lose U.S. market share to their Japanese competitors.

Trust is No. 1

Of the 17 issues measured, none is more important to suppliers than trust, says survey author John Henke, an Oakland (Mich.) University professor of marketing and president of Planning Perspectives Inc., a management-consulting firm in Birmingham, Mich.

In the area of trust, suppliers gave Toyota a score of 3.59 out of a maximum of 4.0, up from 3.4 a year earlier. At the other end of the spectrum, GM rated 2.12, unchanged.

"We have top (Big 3) management saying to us that supplier relations are extremely important," Henke says. "There's no question in my mind that they're sincere about it.

"But when you get down to the buyer level, they're paid on the basis of getting the piece-price down. What top management would like to see in its supplier relationships is not being reinforced from a behavioral standpoint at the lower levels."

Japanese automakers in North America enjoy a leaner cost structure and lower warranty costs than the Big 3, as well as modern plants in low-cost areas.

Henke says the Japanese are every bit as demanding as the Big 3 on costs, but they employ cooperative efforts to obtain price cuts and reward suppliers with long-term relationships. That approach, in turn, yields cost and quality advantages, the report notes. But Big 3 representatives defend their strategies.

"GM and its suppliers are continuously driving to forge more collaborative relationships by collectively focusing on performance and common goals," GM spokeswoman Renee Rashid-Merem says.

Performance counts

Chrysler group spokesman David Barnas says his company's relations with suppliers are based on performance.

"Our goal is to develop an All-Star team every time we select suppliers," he says. "All of our suppliers are measured on quality, cost, technology and supply."

The Big 3 problem is easy to understand but difficult to change, says industry analyst David Leiker of Robert W. Baird & Co. in Milwaukee.

GM, Ford and Chrysler are stuck with higher labor and warranty costs, older and less efficient plants and postretirement costs that the transplants do not have.

At the same time, the Big 3 must spend more heavily on incentives to sell their vehicles than the

transplants because of perceived differences in quality and resale values.

As the Big 3 attempt to fix their business model, they turn to their suppliers, the easiest targets, to generate cost savings.

There is some good news for the Big 3 in the 2003 study. In addition to Chrysler's gain on the overall index, Ford and Chrysler ranked slightly higher than Nissan in the areas of engines and engine components.

The eight-page questionnaire brought responses from mid-level to high-level sales executives at 261 Tier 1 suppliers. They included 250 suppliers to the Big 3, compared with 150 suppliers to Japanese automakers.

Planning Perspectives created the survey in 1990 in cooperation with Clint Lauer, Ford's former director of purchasing.

Survey says

Suppliers' ratings of relationships with 6 customers. (% change from 2002 score.) Scale: 0=very poor; 500=very good
1. Toyota 334 (+7.4)
2. Honda 316 (+7.5)
3. Nissan 259 (+15.1)
4. Chrysler 177 (+3.5)
5. Ford 161 (-1.2)
6. GM 156 (-0.6)
Source: 2003 OEM-Supplier Working Relations Index, Planning Perspectives Inc.

More data from the study

Here's how suppliers rated automakers in some other areas.
Scale: 4.0 = great; 1.0 = very little

Supplier trust of automakers
2003 2002
1. Toyota 3.59 3.40
2. Honda 3.42 3.32
3. Nissan 2.94 2.63
4. Chrysler 2.29 2.26
5. Ford 2.17 2.21
6. GM 2.12 2.12

Supplier willingness to share technology with automaker
2003 2002
1. Toyota 3.10 2.98
2. Honda 2.98 2.98
3. Nissan 2.76 2.64
4. Ford 2.25 2.25
5. GM 2.22 2.13
6. Chrysler 2.21 2.25

Supplier opportunity to make a long-term acceptable return on automaker's business
2003 2002
1. Toyota 3.29 3.07
2. Honda 3.13 3.14
3. Nissan 2.86 2.73
4. Chrysler 2.66 2.64
5. Ford 2.50 2.61
6. GM 2.45 2.58

Extent supplier rewarded new business for cost-saving ideas
2003 2002
1. Honda 2.61 2.27
2. Nissan 2.51 2.27
3. Toyota 2.50 2.23
4. Chrysler 2.08 1.92
5. Ford 2.01 1.83
6. GM 2.00 1.79

Source: Planning Perspectives Inc.