[US] Suppliers bet on the transplants

By Robert Sherefkin, Automotive News

In a soon-to-be-released survey of 259 North American suppliers, parts makers say they are raising r&d budgets and capital expenditures for Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. while reducing expenditures for the Big 3.

"The suppliers see that the real opportunities are with the transplants," says John Henke, president of Planning Perspectives Inc., a consulting firm in the Detroit suburb of Birmingham. "This is a very powerful argument that suppliers are shifting their resources."

Strained relations

In part, the suppliers' shifting investment priorities reflect strained relations with General Motors, Ford Motor Co. and, to a lesser extent, the Chrysler group. Only 3 percent of the suppliers said they had a good or very good working relationship with GM. For Ford, the figure was 5 percent.

By contrast, 63 percent of respondents said they had good or very good working relations with Toyota.

Survey participants include 84 companies on Automotive News' list of the top 150 North American suppliers. North America's six largest automakers were rated according to trust, pressure for price cuts, pressure for quality, supplier profits and allowances for the cost of raw materials.

Henke, a professor at Oakland University near Detroit, launched his annual survey in 2001.

In four previous surveys, suppliers said they had more difficult relationships with the Big 3 than with Nissan, Honda and Toyota. And this year GM hit lows in virtually every category.

Toyota ranks highest, followed in order by Honda, Nissan, the Chrysler group and Ford.

Cost vs. quality

This year the percentage of suppliers that are increasing expenditures for the Japanese was down slightly from 2004. But Henke says the fluctuation was not statistically significant.

Based on this two-year trend, Henke says suppliers believe it's more profitable to do business with the Japanese automakers. Suppliers also believe that GM - and, to a lesser degree, Ford and Chrysler - emphasizes cost rather than quality.

According to the survey, 62 percent of GM suppliers said they cut prices because they were threatened with the loss of business. Forty-seven percent of Ford suppliers and 49 percent of Chrysler suppliers cited that reason for price cuts.

By contrast, 24 percent of Nissan suppliers said they cut prices to avoid retaliation. Just 6 percent of Honda suppliers and 5 percent of Toyota suppliers cited that reason for price cuts.

GM spokesman Tom Wickham downplays the survey's conclusion of poor supplier relationships, saying GM frequently consults suppliers on a range of issues.

Ford spokesman Joe Koenig notes that Ford is "actively working with our suppliers to improve relationships."

Henke says Chrysler's relations with suppliers were pretty good, except for one category of components that he declined to identify.

"There is probably still a concern among suppliers whether (Chrysler's changing attitude) is real or not," Henke says. "It may take a while for them to believe it."

Overall, the Big 3 should accept the survey as a wake-up call, Henke argues.

"This data suggest that they have not yet recognized that they need their suppliers' help to be formidable competitors," Henke says. "They cannot do it by themselves."

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