Autos

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Study shows suppliers unhappy with GM, Ford

May 13, 2003

General Motors Corp. and Ford Motor Co., which spend about $100 billion a year on auto parts in North America, might have a tougher time cutting costs than Japanese rivals unless they improve their rapport with suppliers, a study concluded.

Researcher Planning Perspectives Inc. polled 261 suppliers, which rated General Motors and Ford the worst to do business with among the six biggest automakers in North America. Toyota Motor Corp., the world's third-largest carmaker after General Motors and Ford, ranked first.

General Motors and Ford strained relationships with suppliers by demanding further price cuts because of the automakers' rising costs for consumer incentives and worker retirement benefits. General Motors wants to cut its North American parts bill as much as 20 percent over three years. Ford has said it wants a 15 percent decrease for some parts over two years.

''Suppliers reach a point where they can't do it anymore, and they'll have to walk away,'' said John Henke, president of Planning Perspectives in Birmingham, Michigan. ''I'm inclined to think the poor relationships will eventually lead to some very serious problems.''

Japanese automakers, who also have sought price cuts, are more likely to win future concessions from suppliers and get better-quality components because Toyota and Honda Motor Co., the fifth-biggest maker of autos in North America, cooperate more with parts companies on product development and finding ways to improve operations, Henke said.

About 20 percent of Honda and Toyota suppliers said they granted price concessions to those customers out of ''loyalty,'' the study said. When they gave price breaks to General Motors, Ford and DaimlerChrysler AG's Chrysler, ''the most important factor was that their business was threatened,'' Henke said.

Parts-supplier profits have been hurt by price cuts. In December, Tower Automotive Inc., the largest maker of vehicle frames, said it wouldn't bid to keep supplying frames for Ford's Explorer sport-utility vehicle because it can no longer make enough money on its single biggest contract.

General Motors expects to buy about $56.3 billion in vehicle components in North America this year. Ford, the world's No. 2 automaker, spends $45 billion to $50 billion a year in North America on car and truck parts.

The study ''isn't consistent with what our supplier council has been saying,'' said General Motors spokeswoman Renee Rashid- Merem. The automaker has improved vehicle quality and costs by strengthening its relationships with suppliers, she said.

Ford's relationships with suppliers ''aren't where we want them to be, but we think there's been improvement at an accelerated rate'' this year, spokesman Paul Wood said.

Suppliers in the survey, which is in its third year, rated their customers on trust, communication, cooperation and profit opportunity. On a scale of 0 to 500, Toyota ranked first with a score of 334, up 7.4 percent from 2002 and above the industry average of 218, the study said. Honda was second at 316, up 7.5 percent, followed by Nissan Motor Co. at 259, a 15 percent rise.

Chrysler led U.S.-based automakers at 177, up 3.5 percent from the previous year. Ford declined 1.2 percent to 161 and General Motors fell 0.6 percent to 156.

Bloomberg News