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Parts Suppliers: GM Improved, Rivals Not

American Government Special Collections Reference Desk

Topics:  General Motors

Parts Suppliers: GM Improved, Rivals Not

Mike Bartley
June 6, 2007

The General Motors Corp. has significantly improved its shaky relationship with parts suppliers for the first time in fifteen years, while the rapport has worsened at the Ford Motor Co. and the Chrysler Group, according to a study.

The improvement of Detroit-based GM mirrors its aggressive plan to work more harmoniously with its parts makers and such is gaining traction. Notwithstanding the improvement by GM, North American auto suppliers have far better relations with Asian rivals, according to the annual study by Planning Perspectives Inc., an automotive consultancy in Birmingham.

It can be recalled that in the past few years Detroit's automakers have stridently reduced production while pressuring suppliers to cut prices, pushing a number of parts makers into bankruptcy or near it. The hardships are expected to soften quickly like AEM acceleration.

Inharmonious relationship with auto suppliers can cramp an automaker in a number of ways. Suppliers tend to offer their best technology and highest quality parts to the best customers, Henke said. Suppliers said that price concessions given to Detroit's automakers sapped spending on research and development, while prices paid by Honda and Toyota let them put more into R&D.

Planning Perspectives surveyed 308 suppliers from mid-April to mid-May that represent about half the annual North American parts sales to six major automakers: Toyota, GM, Ford, Chrysler, Honda Motor Co. and Nissan Motor Co.

On a scale of zero to 500, with zero being the most terrible, the survey rated GM's overall relations with its suppliers at 174, up from 131 last year. "We've never seen that type of improvement before," said John Henke, the president of Planning Perspectives. "They've just generally been doing things better from the standpoint of working with their suppliers."

Since the inception of the report in 2001, the suppliers ranked Toyota and Honda the best companies with which to work. Of the six companies ranked, Toyota had the best relations with suppliers with a score of 415, followed by Honda with 380, Nissan 289, Chrysler 199, GM 174 and Ford 162. Ford and Chrysler fell several points from the previous year’s figure.

Henke called a Ford program to improve supplier relations a "disappointing failure." "This is unfortunate because Ford more than ever is dependent on the support of its suppliers to help in its turnaround," he said. GM's goal to perk up its relationship with suppliers started in 2005. At the time, GM's dealings with parts makers had reached the worst point by far. "GM had literally gone off the map in terms of how bad the relationship was," Henke noted.

"We're really pleased with what we think is a very dramatic improvement," said GM spokeswoman Deb Silverman. "It's the result of a couple years of very hard work. There's still work to be done."

As the largest automaker, GM can make or break many of its suppliers. "GM is over 75 percent of our business - we do what we need to do," said Renee Rogers, the spokeswoman for American Axle & Manufacturing Holdings Inc. in Detroit. She said that the company's relationship with GM is good. "We're dealing with things we can control and meeting their requirements as we need to," she added.

Despite improvements, suppliers say they generally do not trust GM, according to the report. Ford and Chrysler also rated low in the trust category. While foreign rivals have improved their supplier relationships over the past years, with minor variations, it appears that progress is dawdling. "We have an open dialogue with them," said Ford spokeswoman Becky Sanch. "You can't introduce a program and expect the issues you've been facing are going to disappear overnight."

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