Ford Climbs the Ranks in Working With Suppliers, Report Says
By Michelle Krebs May 10, 2010For the first time in the history of the 10-year-old study that looks at the relationship between 
automakers and their suppliers, a U.S. automaker -- Ford -- ranked in the top three. It was third, with Honda and Toyota in 1st and 2nd place, respectively.
The annual North American OEM-Supplier Working Relations study, done by Birmingham, Mich.-based Planning Perspectives, closely follows supplier perceptions of their working relations with the top three U.S. and top three Japanese automakers across 14 commodity purchasing areas. About 45 percent of automotive suppliers in Planning Perspectives' database participated in the study.
"When the U.S. automakers were in bankruptcy, or in Ford's case near bankruptcy, they knew they could not come back alone," John W. Henke Jr., president of the management consulting firm, told AutoObserver in an interview. "Alan Mulally (Ford president and CEO), a big proponent of good supplier relations since his days at Boeing, has been taking a more active role in getting top management to strive for strong supplier relations."
Nissan continued to drop in the rankings -- to 4th place this year -- while General Motors in 5th place showed steady improvement. Chrysler, though making progress, was in last place, where it has been since the 2008 survey.
GM and Chrysler showed progress for the same reason Ford did -- GM's Chairman and CEO Ed Whitacre and Chrysler Purchasing Chief Dan Knott, like Mulally, believe strong supplier relationships are essential.
"All three of these company leaders are convinced this is the right way to go and have pushed the ranks below to make supplier relations changes. They are finally doing it. They are starting to walk the talk," Henke said.
"The real challenge is they don't revert back when (business) starts going well," he added.
The Nuts and Bolts
The study's results are used to calculate the Working Relations Index (WRI), which ranks each automaker on 17 items in five key categories: how the automaker is perceived in terms of its overall supplier relations, automakers' communications with suppliers, automakers' help given to suppliers to reduce cost and boost quality, automaker hindrance to suppliers doing their best job and suppliers' profit opportunity at the automaker.
The study proves repeatedly that the higher the automaker's WRI score, the more benefits from their suppliers. 
Ford and GM improved the most in this year's study. "Ford is doing everything right when it comes to supplier relations," Henke said. "Ford has shown steady improvement in all five key categories every year for the past four years, so it is not surprising the company moved to 3rd place overall. If Ford continues to improve at the same pace, and Toyota continues falling, Ford could surpass Toyota in the near future."
Meanwhile, GM has shown considerable gains in all key categories during the same period while Honda, Toyota and Nissan have all dropped. "At its current pace, GM could bypass Nissan in the next year or two," Henke said.
"Staggering" Rise of Domestics; Japanese Drop
Of the six automakers, the U.S. car companies have been in the bottom half of the rankings since 2002 when the WRI started, while the Japanese automakers have stayed in the top half. This year Ford and Nissan have swapped places.
Henke called the change "staggering. Since 2007, Toyota, Nissan and Honda dropped about 21, 14 and 11 percent, respectively, in overall rankings while Ford and GM improved 63 and 31 percent, respectively."
Ford and GM, the survey showed, still need to work on a better approach in obtaining price reductions. While Ford and GM have made dramatic improvements in this area, 21 and 29 percent of their suppliers, respectively, reported the automakers still use threats and retaliation to get price concessions while only 8 percent of Toyota's suppliers would agree. Henke said people skills and manners have a big impact on how suppliers rate automakers here. Japanese automakers use a more genteel, collaborative approach.
The study also measures how suppliers view working relations in the six major purchasing areas within each automaker. Of the U.S. automakers, Ford has the highest-rated purchasing group - its Body-In-White group with 289. GM's best was Chassis at 236. By comparison, Toyota rated highest in Electrical and Electronics with 367, followed by Honda with 357 in that category.
"These scores reflect leadership in the various areas of the automaker," Henke said. The less disparity between the highest- and lowest-ranked purchasing areas shows departments within a company are following similar approaches. "GM's more sustainable than Ford, where there is more disparity." -- Marti Benedetti, Contributing Writer
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