TRAVERSE CITY, Mich. - Automakers and suppliers need to re-evaluate their relationships and focus on collaboration to cut costs and develop technology to differentiate their products, said John Plant, CEO of TRW Automotive Inc.
Cooperation among manufacturers and suppliers also can boost profits for suppliers, allowing more investment in research, Plant said this month at the Management Briefing Seminars.
Without an acceptable level of profit for suppliers, he said, investor confidence in the auto industry won't improve.
"Wall Street doesn't 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 contended.
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 low costs demanded by the industry hinges on all parties being involved from the start. For the system to work efficiently, Plant added, suppliers have to know that they will be rewarded with profit and that their innovations will be protected. Plant, who has steered TRW Automotive toward being a safety system supplier since its spinoff from Northrop Grumman last year, called for a broad-based safety 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. Plant said individual efforts are the key to cooperation among automakers and suppliers.
"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."