Parts makers facing intense pricing pressure by the Big 3 can fight their customers, find new business or embrace collaboration, Ronald Clogg said.
Clogg, a senior manager for electronics and electrical supplier Denso International America Inc., said the collaboration that Denso does is by far, cheaper, faster and works better than other models it tested.
There is a willingness at the highest levels of the Big 3 to collaborate with suppliers, Clogg said Tuesday at the Management Briefing Seminars, "because they see their suppliers as a critical resource, but old policies and old legacies stand in the way."
Clogg was one of five speakers addressing the so-called broken business model between domestic automakers and their suppliers.
Suppliers are not the root cause of this broken model, he said, they are just the easiest targets for the Big 3 as they attempt to fix their own business models.
Clogg, whose job is to oversee economic and industry analysis for Denso, of Southfield, Mich., said collaboration is far less costly.
The cost of engineering documents is one-tenth of that for other types of partnerships, Clogg said.
He contrasted the collaboration model with the "big shadow" model, where the supplier is working outside the automaker's systems.
In the "black box" model, the supplier works inside the automaker but is not working with the automaker.
The collaboration model allows the automaker to focus on overall vehicle validation while the supplier concentrates on component and system validation.
The automaker sets performance goals and allows the supplier to develop specifications to reach the goal.
That way, the automaker respects the engineering expertise of the supplier.
Suppliers are then encouraged to demonstrate their value-added capabilities, Clogg said.
"It's no surprise that it leads to fewer last-minute design changes," he said.
The process is not free of risk. As suppliers get more involved in the front end, they must take on more responsibility, he said. This includes increased investment in r&d as well as consumer research, and design and development.