An annual survey of suppliers that charts their view of relationships with OEMs suggests that Ford, General Motors, FCA US and Nissan collectively would have earned USD2bn more in operating profit last year had their supplier relations improved as much as Toyota‘s and Honda’s did during the past year.

That’s one of the conclusions from the 15th annual North American Automotive – Tier 1 Supplier Working Relations Index (WRI), which looks at supplier relations and how they impact profit. Some 435 suppliers participated in this year’s study, which shows that Toyota and Honda are ‘clearly on top and continuing to distance themselves from Ford, Nissan, FCA and GM who are headed in the opposite direction,’ the study found.

“Last year we unveiled an economic model that proves a direct cause-effect relationship between an automotive OEM’s supplier relations and the OEM’s operating profit,” said the study’s author, John W. Henke, Jr., Ph.D., president and CEO of Planning Perspectives, Inc. “For the first time ever, it allowed us to put a dollar value on suppliers’ non-price benefits – those valuable actions and practices, which along with supplier price concessions make a substantial contribution to an OEM’s competitiveness. The economic model enables us to determine the economic value of the non-price benefits and the supplier price concessions, which in turn enables us to calculate the supplier total economic contribution to the operating profit of each OEM.”

The index that Henke produces showed Toyota and Honda ahead of other OEMs.

“This year, Toyota and Honda improved their WRI ranking a combined average of 8.7 percent over last year’s levels. Using our economic model, we know that if supplier relations at Ford, Nissan, FCA and GM also improved by 8.7 percent, they each would have realised significantly higher operating income – an estimated $2.02 billion collectively. At the low end, Nissan would have generated another $261 million and at the high end GM would have earned another $750 million, with Ford and FCA in between.”

Planning Perspectives says the 2015 Study also shows the following significant changes in supplier relations among the OEMs:

  • Toyota and Honda are ranked one and two, respectively, for the fifth straight year, well ahead of the other four automakers. Toyota has been ranked in first place since the study’s inception in 2002 except for 2009 and 2010 when Honda captured first place.
  • Honda, with 11.8% improvement this year, nearly doubled Toyota’s improvement of 5.6%. If Honda keeps up the pace, it could take over first place from Toyota next year.
  • Honda is the most preferred customer of suppliers, but just slightly over Toyota.
  • Ford has regained third place over a declining Nissan, but only because Ford declined only 2% compared to Nissan’s 10.6%. Ford has dropped to its lowest ranking in five years, but is significantly ahead of FCA and GM.
  • In a ‘major shift’, Nissan, which was most improved overall last year, had the greatest drop in ratings this year and slipped to fourth place behind Ford. This year, Nissan is the least preferred customer of the six OEMs.
  • For the second year in a row, FCA’s and GM’s rankings have fallen. They are now tied for last place, having both dropped 8.5% in the rankings – more than 100 points behind leaders Toyota and Honda.