Supply Talk: The 6 Best and Worst Automakers to Work With

The 14th annual automotive industry study of Tier 1 suppliers conducted by Planning Perspectives Inc. researches major U.S. and Japanese automakers’ working relationships with their suppliers. It indicates that while Japanese firms are making headway, the Big Three are again falling behind. The data collected can be directly correlated to the company’s profitability and competitiveness in the market, and therefore the study carries some weight in corporate boardrooms.

The annual study focuses primarily on Chrysler, Ford, General Motors, Nissan, Honda, and Toyota, because these six automakers comprise 86 percent of light vehicle sales in the U.S.,” according to a press release. Therefore, the Germans have been left out of this aspect of the report.

“History repeats itself. Historically, the Japanese automakers — especially Toyota and Honda — had a commanding lead in supplier relations and were the companies suppliers preferred to deal with. Then, the combination of the 2008 recession, the impact of the 2010 Japanese earthquake, and the increase in purchasing personnel caused both companies to lose their way and their rankings plummeted,” said John W. Henke Jr., the president and CEO of Planning Perspectives.

“Meanwhile the US automakers, under new purchasing leadership, made significant improvements in their supplier relations. Now, however, the ranking trends suggest that the Japanese automakers have figured out their problems, corrected them, and are back on track, while the US automakers appear to be faltering,” he added.

Check out what the study had to say about the following six companies, which are ranked in order from most favored to least, according to the PPI study. You can check out the full report here.

6. Toyota

The Tier 1 suppliers that work with the largest automakers deemed that out of the six, Toyota (NYSE:TM) was the most pleasant to work with. In fact, the company saw the percentage of suppliers that deemed their relationship with the Japanese firm “good or very good” leap over the past year. “Toyota improved in nearly all key areas including supplier trust, communication, help provided to suppliers to reduce cost and improve quality, supplier profit opportunity, and in involving suppliers throughout its product development process — which significantly increased,” the study said.

Toyota also led the pack as far as “paying invoices on time, resolving payment issues in a fair and timely manner, as well as in allocating chargebacks to suppliers and allowing suppliers to recover materials cost increases,” the study said. Toyota was the leader as far as how it treats proprietary and confidential information.

5. Honda

Toyota led the industry greats over the past year, but Honda (NYSE:HMC) was close behind. “Of the Big Six car companies, Honda is the most preferred customer, significantly more so than Nissan and the Detroit Three,” the study found, and though it came in behind Toyota, it fell greatly ahead of the other players. Huge improvements since 2007 in the three areas of supplier relationship, supplier communication, and supplier profit opportunity helped propel Honda to the second-best slot on the list.

Honda is top-rated with Toyota in paying invoices on time and according to terms, as well as in resolving invoice payment issues,” the study said. “Honda is also tied with Toyota in allowing suppliers to recover material cost increases and in the confidential treatment of proprietary information and intellectual property.”

4. Nissan

Nissan (NSANY.PK) set the trend for Japanese manufacturers, showing improvements across the board, managing to become the only OEM to do so. The biggest gains were made with suppliers being given greater flexibility in meeting piece price and tooling objectives, and in Nissan covering sunk costs when programs were delayed or cancelled, according to the survey. Nissan struggled more when it came to allocating chargebacks to suppliers, but its treatment of confidential proprietary information and intellectual property is significantly better than domestic manufacturers, the report found. 

3. Chrysler

Chrysler’s (FIATY.PK) overall supplier relations ranking has decreased slightly for the first time in the last six years, which ended up putting the company back into the poor to very poor range for supplier relations. “Chrysler buyers are ranked lowest in building trust and in transparency when providing information,” the report said. “Chrysler significantly trails all OEMs in paying invoices on time and according to terms, and in resolving issues in a fair and equitable manner.”

Now that Chrysler is under different parentage, these kinks may be ironed out in time as Fiat Chrysler continues to mesh the two companies together. And thanks to this report, the company will know exactly what it needs to work on.

2. Ford

Despite the huge sales success that Ford (NYSE:F) has seen over the past few years, the company is still dragging when it comes to how its suppliers perceive it. Ford’s OEM ratings didn’t get any better, but they didn’t get any worse, either — which is a sort of silver lining, we suppose. “Ford’s overall supplier relations remained stagnant for the fifth year,” the PPI report said. “It now trails Nissan because of a drop in supplier communication and in help it provides suppliers to reduce cost.”

1. General Motors

For the first time in the last six years, General Motors’ (NYSE:GM) supplier ratings fell, and dramatically enough to give the company the dubious award of being the least pleasant company to work with on the supply side. About 55 percent of the suppliers surveyed described their relations with the Detroit-based automaker as “poor to very poor,” up from 48 percent last year, the study showed. 

GM is now the lowest in protecting suppliers’ intellectual property and proprietary information, and the least likely to allow recovery of material cost increases. As a result, General Motors is now the least preferred customer of suppliers “in spite of the efforts of the purchasing VP to improve — an example of good leadership, but poor execution by buyers who interface with suppliers on a daily basis,” the report explained. Onward and upward, then.

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