TRAVERSE CITY -- Auto suppliers don't have to "go down with the ship" as U.S. automakers losing market share to foreign competition hammer them with price cuts, a panel of analysts and suppliers said Tuesday.
But their best alternative -- winning more business from the U.S. operations of foreign-owned automakers -- will take time. The panel made the recommendations Tuesday at the Management Briefing Seminars in Traverse City.
Suppliers that rely on General Motors, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group for most of their revenue need to find more customers quickly, said Kim Korth, president of the Grand Rapids-based consulting firm IRN Inc. Suppliers will find they have more power to change their fortunes with a more balanced customer base, Korth said.
"Suppliers, you have a choice," she said. "You don't have to go down with the ship. ... If you have more than 50 percent of your production on U.S. vehicles, you should be worried."
Korth said suppliers need to stop taking unprofitable business to build volume to make up for weak margins. Suppliers should try to replace that with business from Toyota, Honda and Nissan, all of which have a more collaborative style.
Easier said than done, suppliers say.
Getting rid of volume that makes up for low margins can ultimately hurt the company's operations and ability to win new business, said Alfred "Pete" Peterson III, CEO of Southfield, Mich.-based Peterson Spring, which manufactures engine-valve springs.
"Do I tell this customer who wants 10 percent off to take a hike? If I do, which engineer goes, who don't you need in HR and accounting?" he said. "If we lose that contribution to the margin, we lose the muscle that makes us what we are and helps us with our efforts."
Peterson Spring has been a supplier to Toyota Motor Manufacturing of America Inc. for seven years and is increasing its business with the foreign-owned carmakers, known as transplants.
And it takes time, sometimes several years, to win business with a transplant. Those companies usually have longer-term relationships with their suppliers than U.S. automakers do.
Toyota's U.S. purchasing director said suppliers need to be patient when seeking new business. He also said they need to do their homework before coming to him with a pitch.
"When I started (at Toyota) in 1987, suppliers would always ask, 'What do you want us to do?'" said Gene Tabor, general manager for purchasing, planning, facilities and supplier diversity for Toyota America. "That's hard for us to answer. You have to tell us what you can do."
U.S. automakers have several purchasing executives who understand the supplier relationship needs to change. But that message has yet to get to actual purchasing managers, analysts and suppliers on the panel said.
Korth said it's up to the suppliers to develop a relationship with those executives.
"There are a couple of them at the (U.S. automakers) trying to break the cycle," she said. "You have a responsibility to continue that dialogue. Yes, you diversify, but we're all better off with a vibrant domestic industry."