CINCINNATI - Robert Panning has a rough assignment. Like other auto parts makers, he is under the gun to do business with minority suppliers - even where there seem to be none.
'It's tough,' admits the purchasing agent for Automatic Feed Co., a supplier of massive steel coil handling equipment to Toyota and DaimlerChrysler auto plants. 'You can count the suppliers on two hands who supply 85 percent of our content. We really don't know who's out there to do what we have to do.'
The job may be tough, but the potential consequences are tougher. Toyota Motor Manufacturing North America Inc. has vowed that by 2002 it will spend at least 5 percent of its $7 billion annual Tier 1 purchasing budget with minority companies. And it has directed its Tier 1 suppliers, like Automatic Feed, to make the same 5 percent commitment to its own suppliers.
If they fail?
'It's just a matter of encouraging them to do it,' says Chuck Brown, the automaker's vice president of accounting and finance. 'But if we keep coming to you and you keep telling us that you haven't done anything, we may go find one of your competitors who has.'
Toyota is not alone. Most of the companies building autos in the United States have bellied up to a purchasing commitment bar in the recent years. But few, if any, have reached their tar-gets.
General Motors, which has chided Toyota and other Japanese automakers to do more, has a 10 percent goal for first-tier suppliers. A spokesman said GM is currently between 4 percent and 5 percent. GM's goal for other tiers is 5 percent.
Toyota is currently at about 2 percent minority purchases. The difference between that level and 5 percent is another $200 million a year in spending, based on current purchasing levels.
The Japanese carmaker held its ninth annual minority purchasing conference here Nov. 11. Eight years ago, the company hosted the event at a small Holiday Inn in Lexington, Ky., near its U.S. auto factory, with a small lunch catered around the motel swimming pool. At this year's event, 1,400 participants crowded into the Cincinnati Convention Center. About 240 of Toyota's Tier 1 suppliers had booths to attract minority vendors.
No one thinks the job will be easy. For one thing, American industry has never had much in the way of minority-owned manufacturers. And in the increasingly consolidated world of automotive parts making, the chances of finding a competitive, independent minority-owned supplier of cutting-edge components gets slimmer by the year.
'The problem is that many minority owned businesses are in the services sector, and we're looking for manufacturers,' said Bonnie Gales Baptiste, purchasing manager for Neill-La Vielle, a Louisville-based distributor of nonproduction items ranging from pallets to hand soap. Manufacturing contracts tend to be worth a lot more than service deals.
Neill-La Vielle started its own minority purchasing program five years ago. The first year, it spent $20,000 with minority-owned companies. This year it will spend $750,000.
'But we're still not at 5 percent,' Baptiste says. Every quarter, Neill-La Vielle sends out 6,000 catalogs to industrial customers such as Toyota. Baptiste believes one solution might be to find a minority company to print all those catalogs. 'That might do it,' she says.
At the Cincinnati event, minority businesses with no manufacturing ties to the auto industry received earnest audiences with the likes of such huge suppliers as Delphi Automotive Systems, Visteon Automotive Systems and Magna International Inc. Advertising agencies, temporary personnel services, a roofing contractor, an insurance company and even a concert promoter trolled the aisles of the convention booths.
Suppliers say hitting the required 5 percent level takes some creative thinking. For example, Essex Specialty Products Inc., a subsidiary of Dow Chemical Co., produces industrial adhesives for Toyota. The company uses few outside material suppliers, other than for raw materials. In the quest for 5 percent, the company found minority firms to package their products and handle their trucking.
The same problem confronts Toyota's chief steel supplier, AK Steel Corp. of Middletown, Ohio. 'We all know this is the right thing to do,' says buyer Jean Lacy. 'The only trouble is figuring out how to do it. It would be real nice if we could find a minority-owned coal mine or railroad or barge line. But that's not very likely.'
Even Toyota's own minority-owned suppliers must find minority companies. Mexican Industries Inc., an Hispanic-owned interior trim supplier in Detroit, recently took the contract to put retainer nets in the trunks of Kentucky-made Camrys. The company is scheduled to supply other products on upcoming Toyota vehicles. Now it must meet its own minority purchasing targets.
'I think the only way to really do it is through some form of alliances,' suggests Steve Couchenour, of Mexican Industries' Southfield, Mich., sales office. 'Find a partner. It's just too hard to find that many minority suppliers.'
Even as the supply chain discussed ideas and looked for new business deals, a prominent civil rights leader exhorted the group to work harder - and think broadly. Kweisi Mfume, CEO of the NAACP, urged the group to think of minority firms for travel services, printing and janitorial work. Said Mfume: 'There are a lot of things beyond widgets that will help you to your goal.'