Why automakers can't beat up suppliers any more

TRAVERSE CITY, Mich. -- Remember the old days when automotive purchasing czars such as General Motors’ Inaki Lopez and Ford’s Carlos Mazzorin threw their weight around with suppliers?

Those days are gone. At a time when suppliers are developing systems for cutting-edge features such as collision avoidance, infotainment and augmented reality, those vendors expect to be treated like partners rather than supplicants.

This week, researcher John Henke estimated that suppliers fattened Toyota’s profits from 2008 through 2013 by $2,390 per vehicle.

Want more evidence? Rob Csongor, general manager of Nvidia’s automotive unit, hammered that point home Monday after his presentation at the 2014 Management Briefing Seminars here in Traverse City.

Nvidia, which is based in Santa Clara, Calif., produces graphics chips for Audi and Tesla. While the company is a major player in the gaming industry, it’s a relative newcomer to the auto industry.

Rob Csongor, general manager of Nvidia’s automotive unit. Photo credit: Greg Horvath

Many people classify Nvidia as a hardware producer, Csongor says, but it also develops the underlying software that supports the vehicle’s operating system and infotainment apps.

To support its customers, Nvidia has assigned a large number of software engineers to Audi headquarters in Germany and Tesla’s headquarters in California. Likewise, the automakers have sent software engineers to Tesla’s offices.

“We have a lot of people who live and work in Germany,” Csongor said, and a bunch of Audi guys with Nvidia badges come to work in our building every day.”

If an automaker tries to maintain a traditional supplier hierarchy – with chipmakers like Nvidia classified as Tier Two suppliers – the result would be disastrous, Csongor said. For key activities like software debugging, companies like Nvidia have to work directly – and closely – with the automakers.

And if an automaker tries to cut corners, the resulting software cleanup might easily cost $100 million-plus, Csongor noted.

You can reach David Sedgwick at dsedgwick@crain.com

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