In the eyes of suppliers, Toyota and Honda surge

As far as North American suppliers are concerned, Toyota and Honda are the gold standard, while Ford, Nissan, Fiat Chrysler and General Motors are also-rans.

In the latest annual survey by Planning Perspectives Inc., 435 suppliers gave the purchasing operations of Toyota and Honda high grades for their top executives, bureaucracies and efforts to cultivate long-term relationships.

BMW AG, which was rated separately, also drew high grades.

But Ford, Nissan, FCA and GM each got worse scores than they did last year, ending a six-year stretch in which they had closed the gap with Honda and Toyota. Volkswagen, which was graded separately with BMW, did worst of all.

The survey did not get enough get responses to rate Hyundai and Mercedes-Benz.

John Henke, president of Planning Perspectives and author of the survey, says the Detroit 3 automakers appeared more willing to collaborate with suppliers during the recession, when their survival was at stake.

Now, purchasers at FCA and GM once again are focusing primarily on price cuts, Henke said.

"When internal mandates come down to reduce cost, buyers are simply reverting back to their old adversarial ways of getting the reductions," he noted in a written statement.

Henke graded each automaker on five metrics: relations with suppliers, communications, efforts to help suppliers cut costs, willingness to share savings and avoidance of hindrances such as late engineering changes.

GM purchasing chief Steve Kiefer said he is working to improve relations with suppliers.

"While there is more work to do, we have set clear objectives and implemented tools to achieve mutual business goals," he said in a written statement.

FCA purchasing chief Tom Finelli acknowledged his company's poor results and said he has launched a turnaround to improve ties with suppliers.

"We have significant progress to make," Finelli said in a written statement. "We have recently reorganized to focus on supplier relations globally, which should help us, among other things, drive consistent behaviors across our regions as well as throughout all levels of the organization."

Here's how the automakers rated:

• Toyota was most willing to compensate vendors for raw material costs and ensure their financial welfare. Toyota's index score was 336, up from 318 last year.
• Honda got top grades for efforts to build trusting relations with suppliers. Like those at Toyota, Honda's purchasing chief and bureaucracy drew high grades from suppliers. The company scored 330, up from 295 last year.
• Ford passed Nissan into third place, although its score edged down from 267 to 261. Ford improved communications with vendors, but the percentage of suppliers that say they have good relations with Ford dropped for the third straight year.
• Nissan's score plunged from 273 to 244 as suppliers faulted the automaker for "adversarial" efforts to seek price reductions. Suppliers also said Nissan was reluctant to offer full compensation for raw material cost increases.
• GM fell from 244 to 224. Despite efforts by Kiefer to improve relations, GM's purchasing bureaucracy aggressively sought price cuts.
• FCA's score fell from 245 to 224 as suppliers faulted it for slow payments and lack of effort to help vendors cut costs.

Planning Perspectives rated BMW and Volkswagen separately, in part because they are relatively recent additions to the study.

BMW scored 346, up from 311 a year ago. It drew high marks for communications, supplier profits and lack of hindrances.

Volkswagen got a low score of 220, although it improved from last year's 181. VW did slightly better in all five metrics, and its Chattanooga assembly plant scored significantly better than its Puebla, Mexico, facility did.

If the Henke report is accurate, then Toyota and Honda have re-established their prerecession status as the clear favorites among suppliers. But the Detroit 3 still achieve significantly better ratings than they did before the recession.

Last November, GM introduced the One Cost Model, a program that allows some vendors to get no-bid contracts. GM engineers visit the supplier's factory and study its production costs. If GM and the vendor agree on the part's cost, the supplier gets the contract.

Meanwhile, Ford continues to fine-tune its Aligned Business Framework, a program that allots 65 percent of its purchasing budget to 80 direct suppliers and 25 indirect vendors.

On Thursday, May 14, Ford said it would continue to promote closer relations with key suppliers through the program. "We are pleased Ford is the top domestic automaker in the Planning Perspectives study, and we'll build on this strong foundation."

Nissan, Honda and Toyota had no immediate comment.

With these and other initiatives in mind, Julie Fream, president of the Original Equipment Suppliers Association, says she was a bit surprised by some of the low scores.

Toyota, Honda, Ford, Nissan, GM, FCA and Volkswagen all have held town-hall meetings with their suppliers under OESA's auspices, she noted.

"I know that all of the automakers are working to improve their relations with suppliers," she said. The low scores were "a little surprising because I've seen all of them working at it."