Thanks to persistent efforts by the Detroit 3, top automakers in North America are closer to parity in their relations with suppliers than they have ever been.
But automakers and suppliers will need to redouble their cooperative efforts to avoid the potentially destructive strain of production fits and starts throughout the supply chain that could come later this year.
In his 11th annual survey of North American supplier attitudes, John Henke of the consulting firm Planning Perspectives reports that the Detroit 3, which a half-decade ago were far, far behind the Japanese automakers in their relations with suppliers, have made tremendous progress.
Henke's survey is more than a popularity contest. The results reflect the high-function, high-value partnerships forged to benefit automakers and suppliers.
Today, suppliers' reviews of their relations with the automakers' North American manufacturing arms rate General Motors and Chrysler Group as statistically equal to Nissan Motor Co. and just a notch below Ford Motor Co.'s rating. Toyota Motor Corp. and Honda Motor Co. still have the best relations with suppliers, but their ratings have been declining steadily since 2007. The gap is much narrower.
Purchasing bosses Tony Brown at Ford, Bob Socia at GM and Dan Knott at Chrysler deserve credit for working hard to improve their companies' relations with suppliers. They have appointed lieutenants who also see value in those relationships that goes beyond a price tag.
The improved automaker-supplier relations will be put to the test soon. With factories temporarily constrained by parts shortages in the wake of the Japanese earthquake and tsunami, automakers are expected to want to crank up production sharply in the third and fourth quarters.
But suppliers will be hard-pressed to meet aggressive output goals. Parts makers and their raw-material suppliers cut capacity during the recession. In some cases -- such as tires, steel, rubber, certain resins and electronic components -- boosting capacity isn't as simple as adding overtime.
Obtaining financing to expand capacity remains problematic, especially for Tier 2 and Tier 3 suppliers. An A.T. Kearney consultant says that if the automakers expect to boost production they will need to monitor their Tier 2 and Tier 3 suppliers closely and "know where the choke points are."
It will be a challenge for automakers and an opportunity to take relations with suppliers to the next level.