TRAVERSE CITY, MICH.-- Automakers and suppliers need to re-evaluate their relationships and focus more on collaboration in order to cut costs and develop technology to differentiate their products, said John Plant, president and CEO of TRW Automotive Inc.
Greater collaboration among manufacturers and suppliers can also lead to a restoration of profit margins for suppliers – a key factor for investing in research and development of new technology, Plant said yesterday at the Management Briefing Seminars.
Without an acceptable level of profit for suppliers, investor confidence in the auto industry wont improve.
Wall Street doesnt reward faith or promises, Plant said. Wall Street rewards results and action.
Plant called for an era of collaborative commerce, which he described as suppliers and automakers sharing technology, benefits and accountability.
Suppliers create two-thirds of the innovation and provide two-thirds of the content of a vehicle, Plant noted. But the elements that determine nearly 85 percent of the cost of the final part are locked in during the design stage. So delivering new products at the cost levels the industry demands hinges on the parties being involved from the start.
But suppliers have to know that they will be rewarded with profit, and their innovations protected, for the system to work, Plant said.
Plant, who has oriented TRW Automotive into being a safety system supplier since its spin-off from Northrop last year, said it was good that some companies and government agencies are touting safety, but said there needs to be a broader effort.
Automakers, suppliers, NHTSA and other organizations all collaborating on a broad range of safety-related communication, I believe, can have an even more dramatic impact on raising public awareness of auto safety, Plant said.
To improve suppliers relationship with automakers, Plant said suppliers need to help themselves.
I do not suggest or recommend any specific or new organization or structure to speed our communication and our involvement, Plant said. Bureaucratic structures will consume even the most determined of collaborative processes.
He added: This industry needs better collaboration that forms long-term relationships.