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Ford in supplier study's top 3

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Ford in supplier study's top 3

Firm's ranking a 1st for a U.S. carmaker; GM improves most

Alisa Priddle / The Detroit News

Ford Motor Co. is the first U.S.-based automaker to crack the top three automakers in terms of positive relationships with its suppliers, and General Motors Co. is the most improved, an annual study released today shows.

Ford placed third after Honda Motor Co. and Toyota Motor Corp. in the annual study by Planning Perspectives Inc. of Birmingham, which uses data from suppliers to gauge the ever-changing relationship parts makers have with the top six automakers. Nissan Motor Co. was fourth, followed by GM and then Chrysler Group LLC.

But the results show an industry in flux.

"The way the rankings have changed for the Japanese companies and the U.S. automakers is staggering," said Planning Perspectives President John Henke. "Since 2007, Toyota, Nissan and Honda have dropped about 21, 14 and 11 percent respectively in their overall rankings while Ford and GM have improved 63 and 31 percent respectively."

Directional change is important as the automakers with the best rankings tend to benefit from lower costs, higher quality and more innovation from their suppliers.

"A good relationship determines a supplier's willingness to invest in new technology in anticipation of business and give that automaker a competitive edge," Henke said. Suppliers are reluctant to quote on contracts with adversarial automakers.

"Suppliers are more willing to share new technology with Honda and Toyota than with GM and Chrysler," Henke said. And they are more willing to give loyal customers price concessions in anticipation of support and payback in the future.

But there are cracks in relations at Honda and Toyota, which had dramatic growth prior to the recession and falling sales. "This in turn led them to become somewhat adversarial in getting price reductions from suppliers," Henke said, based on supplier responses.

Conversely, the improvement at Ford and GM reflects their appreciation of their smaller supply base.

Each of the Detroit Three has been at the bottom. This year's scoring is based on 650 purchasing personnel from 510 tier 1 suppliers that rated six automakers.

Honda has been the best for two years now, despite growing dissatisfaction among its suppliers.

"We're happy to be rated highly overall again," said Honda spokesman Ed Miller. "We realize it's been a tough road for suppliers in recent years, and there is some angst out there."

Toyota was No.1 when Henke founded the scoring model in 2002, but the numbers started falling off in 2007 and Honda took the top spot last year.

Henke said Toyota was improving but quality issues diverted its attention and resources. He fully expects Toyota to get back on track.

"Toyota is committed to strong, long-term relationships with our suppliers," said Toyota spokesman Mike Goss. "We work hard to improve those relationships every day. These priorities have remained the same, even during the economic downturn over the last couple of years."

"The Planning Perspectives study is one of several tools we use to monitor our progress," Goss said. "We will analyze the results and adjust accordingly."

Nissan has been on a gradual decline since 2004, which made room for the improved Ford to move into the third spot from being ranked last only three years ago.

The results suggest Ford's goal to become the suppliers' customer of choice is being embraced, said global purchasing chief Tony Brown.

Ford's challenge is to ensure the culture change is uniform across all purchasing groups and is sustainable, Henke said. "The worst thing for Ford would be to go back to their old ways."

Brown said Ford will avoid that pratfall by sticking to its plan and respecting that "suppliers represent a lot of the technology on our vehicles and manage a lot of the cost."

And recognizing Ford "still has a lot of work to do will prevent us from being cocky and will improve how we do business," Brown said.

GM boosted its score by almost 25 percent and has come a long way from languishing at the bottom of the list from 2002 to 2006.

Henke expects GM to pass Nissan given the commitment to better relations from the top: GM Chairman Ed Whitacre.

Purchasing chief Bob Socia said, "It is gratifying that despite our time in bankruptcy, we had the most significant year-to-year improvement." While he is confident the automaker is on the right track -- GM is paying suppliers faster, sharing savings from new ideas and streamlining processes -- "we are by no means satisfied."

Chrysler scored lowest for the last two years but shows a consistent rate of improvement that Henke expects to continue under current purchasing chief Dan Knott. Knott had to undo adversarial business practices put in place under previous owner Cerberus Capital Management LLP, but the changes should add to the 15 percent improvement this year, Henke said.

"Healthy supplier relationships are absolutely critical to Chrysler's success moving forward," the automaker said. "We are working very hard to fix our internal processes and talk with suppliers in a transparent, fair and collaborative way," moves the automaker sees as paying off.

Henke warns that while results for the Detroit automakers are encouraging, "they have to be careful they don't become enamored with success because they are still well behind Toyota and Honda."

The fear is that GM and Chrysler return to old adversarial ways.

"We've seen the intentions of the Big Three to be more cooperative, but the humbleness of the two companies that went bankrupt didn't last very long, and they're back to the way they used to do things," said Heinz-J Otto, CEO of Behr America in Troy, which makes air conditioning and engine cooling systems. There were price concessions, but now the automakers want it back or made up in future contracts, he said.

"There is nothing wrong with pressuring suppliers to reduce cost, but you can do it without endangering the relationship if you do it in an equitable way," Henke said.

From The Detroit News: http://www.detnews.com/article/20100510/AUTO01/5100342/1148/auto01/Ford-in-supplier-study-s-top-3#ixzz0nXEBq9tD

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