GM gets its groove back with suppliers

Survey finds improvement after purchasing overhaul

DETROIT -- General Motors has buried the hatchet with its suppliers.

According to the just-released Henke survey, which evaluates the purchasing policies of North America's six biggest automakers, suppliers ranked General Motors just behind Toyota and Honda.

Ford and Fiat Chry-sler ranked fourth and fifth, while Nissan plunged to last place. The report drew its conclusions from questionnaires filled out by 652 salespeople that work for 108 Tier 1 suppliers.

GM's ascent and Nissan's decline have gained momentum over the past two years, according to the survey.

GM "is making really great strides in their overall relations," said John Henke, author of the survey and president of Planning Perspectives Inc. of Rochester, Mich. "The suppliers are saying, "We can really do a great job.'"

In 2011, GM began to roll out more collaborative policies such as no-bid contracts. In 2015, the company followed up by asking approximately 500 suppliers for feedback. Vendors filled out scorecards that rated GM's purchasers.

Kiefer: GM purchasing chief made pledges.

The automaker included those responses in its job reviews, said GM purchasing chief Steve Kiefer. 

"We made some personnel moves based on that feedback," Kiefer said. "Some of our people have adapted really well [to GM's new purchasing policies], and some have been moved to other areas." 

On a year-by-year basis, automakers rarely make big moves up or down Henke's rankings. That's because their purchasing reforms can take effect only as each new model is designed. 

Which is why GM's sharp improvement is so noteworthy. Just two years ago, GM was tied with FCA in last place. 

At the time, suppliers were still riled up about GM's revised terms-and-conditions contract, which some vendors believed left them exposed to greater warranty liability. 

GM subsequently backtracked, but relations with suppliers were still poor in 2014, when Kiefer was named vice president of global purchasing. Kiefer soon afterward pledged to: 

  • Involve suppliers earlier in the vehicle design process. 
  • Award long-term contracts with higher production volumes. 
  • Improve sales forecasts to help suppliers plan for realistic production volumes. 
  • Introduce a no-bid contract dubbed One Cost Model. 

Henke says Kiefer kept his word. "General Motors is still asking for cost-downs, but in a nonadversarial way," he said. "They aren't just demanding lower prices; they are helping suppliers to figure out how to take cost out."

Building blocks
The Henke survey analyzed each purchasing operation's relations with suppliers by component segment. Here are the best and worst performers.
Purchasing segmentBestWorst
Body-in-whiteToyotaChrysler
ChassisToyotaNissan
ElectricalToyotaNissan
ExteriorGMNissan
InteriorToyotaNissan
PowertrainHondaNissan
Source: Planning Perspectives

Nissan struggles

While Kiefer oversees GM's ongoing shakeup, Nissan's relations with suppliers are in a downward spiral.

Nissan aggressively demanded price cuts but failed to give suppliers the right tools to reduce their costs, Henke said. As a result, suppliers are reluctant to share new technology and make price concessions.

"Nissan's adversarial approach to reducing costs has greatly disrupted relations with its suppliers," the report noted. "It is safe to say that it has cost them tens of millions of dollars in supplier contribution to profits."

Late Friday, Nissan spokesman Brian Brockman released a written statement disputing the survey’s conclusions.

“These study results do not reflect our experience of the technical and commercial relationships that we have with our suppliers, who have made significant contributions to Nissan’s growth in North America,” the statement noted.

However, a company executive admitted last November that Nissan must repair relations with suppliers.

Chris Reed, Nissan's vice president of component engineering, told a group of suppliers in suburban Detroit that Nissan had focused too much on cost cutting.

"As a team, we want to be more collaborative upstream," Reed told attendees at a meeting sponsored by the Original Equipment Suppliers Association. "We've alienated ourselves a little bit."

At the time, Reed said he intended to outline a plan to improve relations with suppliers over the next six months. On Friday, Nissan confirmed that a new business plan will be released later this year.

GM soars, Nissan sinks
Toyota and Honda are perennial leaders in the annual Henke survey. This year, General Motors made a big move up in the rankings, while Nissan sank to the bottom.
652 salespersons that work for 108 Tier 1 suppliers rated automakers on 16 variables. Higher scores are better; no company has ever scored more than 450.
 201720162017 rating
Toyota328332Adequate
Honda319323Adequate
General Motors290250Adequate
Ford270267Adequate
FCA218222Poor
Nissan203225Poor
Source: Planning Perspectives

Toyota tinkers

Henke evaluated Nissan, GM and other automakers by asking suppliers to grade each automaker according to variables such as profit opportunities, communications, and automaker-supplier relations.

The survey measured each automaker according to six purchasing categories: chassis, body-in-white, electrical, powertrain, interior and exterior.

Nissan was worst in five out of six segments. Toyota was the best performer in four categories, while Honda and GM each topped one category.

Toyota performed strongly in part because it seeks input from suppliers on new vehicles long before Job 1. For example, Toyota invited 40 suppliers to collaborate with its designers on the next-generation Avalon.

Young: Positive feedback

Twenty-six to 32 months before Job 1, these vendors were asked to improve the manufacturability, quality and cost of 52 components, said Bob Young, Toyota's North American purchasing chief. 

Young also has imported Toyota's monozukuri initiative -- which debuted in Japan in 2010 -- to North America. The word, commonly used by Japanese manufacturers, means the "craft" of manufacturing.

A year or two before Toyota produces an initial vehicle concept, it takes a clean-sheet approach to key components. Suppliers currently are analyzing 20 components for the next-generation Sienna minivan, Young said. 

"We expect this collaboration to grow," Young told Automotive News. "The feedback is extremely positive."

The automaker will try this with the next Tundra pickup, too, but any upgrades will be step-by-step. "It's a pretty rigorous program," Young said, "and we are somewhat limited with our resources. It is quite labor-intensive." 

While Toyota remains the auto industry's top dog -- at least as far as purchasing policies are concerned -- Henke seems most impressed by Kiefer's reform of GM's vast purchasing bureaucracy. 

"Kiefer brought in a team that is marching to the same tune," Henke said. "He has a team of people that believe in what he is doing."

You can reach David Sedgwick at dsedgwick@crain.com

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