IRN asked 202 suppliers to describe their price-hedging strategies for a variety of raw materials, including steel, aluminum, plastics, rubber and other materials.
Suppliers told IRN that automakers are starting to accept price indexing to avoid time-consuming one-on-one negotiations with hundreds of suppliers.
"The carmakers have embraced the concept," said IRN CEO Kim Korth, "because they don't need to renegotiate the cost of every part with every supplier."
Toyota Motor Corp. and Ford Motor Co. have proved most willing to index the cost of all raw materials, the IRN survey found. Sixty-four percent of Toyota suppliers and 60 percent of Ford suppliers said the automakers were "somewhat likely" or "more likely" to grant satisfactory price increases.
By comparison, 40 percent of Chrysler Group's suppliers and 43 percent of General Motors Co.'s suppliers said those automakers are willing to do so. Spokesmen for GM, Ford and Chrysler declined to comment.
Toyota "reviews pricing annually, including the price of our raw materials as well as other cost components," said Gene Tabor, Toyota's North American general manager of purchasing, in an e-mailed statement.
Steel price indexing is a big-ticket issue for automakers. In 2008, the average light vehicle sold in North America weighed 4,100 pounds. Despite increased use of plastics, aluminum and magnesium in vehicles, steel still accounted for 65 percent of that weight.
The price of cold-rolled carbon steel peaked at $1,153 per ton in 2008, then crashed to $467 last year. This year, the price soared back up to $800 in April, then subsided to $720 in August.
Those swings reflect similar volatility in the prices of the raw materials that go into steel. Over the past year, iron ore prices veered from a low of $60 per metric ton up to a peak of $182 in April before subsiding to $140 in August.
The roller-coaster ride causes sleepless nights for purchasing managers, says Tom Stundza, a commodities analyst for IHS Global Insight.
"The market is so uncertain about where it's going right now," Stundza says. "An awful lot of companies have gotten involved in risk management with their suppliers. The cost pass-through provision is one arrow in the quiver."
It's not just users of steel that are looking for contractual pass-throughs. The IRN survey found that 59 of 100 respondents that use aluminum also had some sort of cost-recovery mechanism built into their contracts. Out of 47 respondents that use natural rubber, a quarter had some form of cost-recovery mechanism in their contracts.
The natural-rubber contracts were particularly significant, says IRN's Korth: "That's not a material people have negotiated in the past."