Ford, Volkswagen and other automakers will have to work hard to convince a sceptical partsmaking industry that carmakers really want to begin kinder, gentler era of cooperation with their suppliers, according to Automotive News Europe.
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Relations between manufacturers and suppliers have been damaged by nearly a decade of relentless pressure from carmakers for lower parts prices. This pressure has played a role in the bankruptcy of several major suppliers.
Ford, General Motors and VW group have finished near the bottom of recent surveys measuring suppliers’ attitudes toward their automaker customers.
In September, Tony Brown, head of Ford global purchasing, announced the US carmaker will cut in half the number of global suppliers it uses and reward those that remain with long-term deals, giving them early access to product programmes. The Ford plan is called the Aligned Business Framework.
“We have a problem with the business model in this industry,” Brown said at the time. “It is not working effectively for our suppliers. It is not working effectively for us.”
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By GlobalDataTwo weeks later, Volkswagen group brought together 38 selected suppliers to identify ways to cut costs.
“We now have an open-book relationship with all suppliers from Tier 1 through to ‘Tier N’,” said Francisco Javier Garcia Sanz, VW’s board member for procurement, in an interview with SupplierBusiness, a UK-based consultancy.
Renault and PSA/Peugeot-Citroen quietly have been working to bridge the gap with suppliers with new cooperative programmes during the past few years.
Speaking at the Equip Auto suppliers show in Paris in October, Valeo CEO Thierry Morin said: “Ford is realising the limit of their system, which consisted of always awarding the contract to the cheapest supplier. They now want to be more like Toyota.”
Renault and Nissan CEO Carlos Ghosn, also speaking at the supplier show, said he believes “The relationship between carmakers and suppliers is getting closer.”
Morin rated Renault-Nissan and PSA in the middle, with US carmakers among the most difficult to work with and Toyota and BMW among the best.
Particularly useful, said Morin, are the regular monthly meetings Renault holds with its top 10 suppliers, and PSA’s willingness to consult with suppliers in their areas of expertise.
Industry observers say automakers such as Ford and VW face two major challenges if they want to be more like Toyota and BMW.
They must convince suppliers they won’t slide back into old bad habits at the first sign of pressure and they must instill a new attitude in their own corporate cultures from the bottom up.
Suppliers say certain manufacturers still treat them poorly.
“It’s shameless what some manufacturers want to force on suppliers via terms and conditions,” Wolfgang Vogel, a management board member at ZF Friedrichshafen, told an industry conference in Mainz, Germany, in November.
Lars Holmqvist, CEO of Brussels-based CLEPA, the European supplier association, said Ford, GM and VW have to do much more than announce their intentions to change their ways. They will have to work as true partners with suppliers.
“There is no partnership left,” said Holmqvist, who has been a vocal critic of several manufacturers, especially Ford. “Those guys – GM and Ford primarily – have to prove they mean business. So far we haven’t seen it. Partnership takes a lot of guts from the manufacturers and the suppliers. Partnership means long term.”
Said Eric Wallbank, an analyst with Ernst & Young in London: “The jury is still out on how successful they’ll be in implementing these new policies. These companies are some extremely large and complex organisations. They may find it difficult to join these things up internally among different functions: engineering purchasing, manufacturing, commercial and logistics. One of the challenges will be to get all their functions to align around the new policies.”
Wallbank said some suppliers have stopped sharing their latest technology with certain manufacturers because they no longer trust them.
“Some suppliers have stopped taking innovations to the manufacturers because the manufacturer is saying: ‘Just because you bring us the innovation doesn’t mean you’ll get all the business. We’re going to take your innovation and share it with your competitors in the production phase’.”
