Suppliers spurn price-cut pleas
Suppliers are learning to say no when customers demand price cuts, according to a survey by IRN, a Michigan consulting firm. But guess which automaker gets rejected most often: Toyota, that paragon of smooth supplier relations.
IRN last month asked 130 suppliers how they responded when customers sought price reductions on existing contracts. Thirty-six percent of those who supplied Toyota said they gave the automaker a price cut of 0 percent. As in none at all.
Twenty-nine percent of Nissan suppliers rejected any price cuts, and 27 percent of Ford suppliers did likewise. Twenty-two percent of General Motors suppliers and 19 percent of Chrysler suppliers did so.
Suppliers were most accommodating with Honda. It got flat rejections from only 17 percent of the suppliers in the survey.
So what's the problem with Toyota?
"In some cases, ... these respondents say that Toyota represents only 1-15 percent of their business and that they are not a preferred or strategic supplier to this customer," IRN analyst Melissa Anderson wrote in an e-mail. "In that type of situation, we are more apt to see suppliers say, 'Screw it, we're not budging.' "
She added: "In spite of the fact that it has long been a sort of 'Good Housekeeping Seal of Approval' to be able to say that you are a Toyota supplier, some suppliers have gotten fed up with the difficulty of making a reasonable (in their view) profit on Toyota business."