Porsche finishes first in supplier relationship study

ERJ staff report (AN)

Cologne, Germany -- Porsche edged Toyota to finish No. 1 in the eyes of parts makers in a new study on automaker-supplier relations.

Porsche finished with 617 of 1,000 possible points in the 2011 Supplier Relationship -- or SuRe -- index, a ranking of 30 global automakers that was the key part of the seventh annual Automotive News Europe/Supplier Business OEM-Supplier Relations Survey presented here Thursday.

Toyota, last year's top finisher, was second with 614 points while Honda Motor Co. (602 points), BMW AG (594) and Audi AG (592) rounded out the top five.

US automakers suffer

Ford North America was the highest ranked US automaker with 535 points, down from 588 in 2010.

The North American, European and other international divisions of Ford Motor Co. and General Motors were all scored separately.

Ford Europe scored 510 and Ford Asia Pacific, including the automaker's operations in the rest of the world, had 490 points. This was the first year Ford's Asia Pacific division was included in the SuRe index. Ford Europe lost 37 points from last year's 547.

GM's North America division scored 496, a loss of 23 from the automaker's five-year high of 519 last year. The survey authors said GM North America, along with Chrysler, needed to improve organisational support for the supplier base.

GM Europe finished with 480 points, while GM's international operations scored higher with 487 in their first year on the list. GM Europe scored 504 in 2010. GM Europe was called one of the more "thrifty" companies on the Continent in the profitability analysis.

Suppliers also found GM, on a whole, less trustworthy than all the Chinese brands except for Chery.

Chrysler was one of only two automakers, Skoda being the other, to increase its score in 2011. Chrysler finished with 484, up 10 from last year, but still considered below average.

Traditionally, US automakers trail European rivals, survey authors said. But as more Chinese automakers enter the market and expand globally, GM, Ford and Chrysler have all started to enjoy better relations with their supply bases.

BMW tumbles

Overall, the average score for automakers fell to 513, the lowest SuRe index total since the index began in 2006. This year's score also is well below the high average of 572 points in 2010.

A reason that the overall average dropped was because of big declines in the scores given to automakers such as BMW, Toyota and Honda.

BMW's score slipped 42 points from last year, falling below 600 for the first time since the SuRe results we launched.

Matteo Fini, principal analyst at Supplier Business, said BMW fell because suppliers found that the German automaker has become "more confrontational" than in previous years. He said BMW's declining score coincides with its drive to cut costs for parts and supplies by 4 billion euros by 2012.

BMW announced the goal in late 2007 and Herbert Diess, BMW's purchasing chief, told Automotive News Europe in March that the automaker has completed the program more than one year earlier than expected.

Fini also said suppliers find that BMW is no longer very fussy about low-cost sourcing, despite being a premium brand.

"All these aspects do have an impact on suppliers' perception of their profit opportunity," he said.

Toyota, Honda slip

Toyota and Honda dropped by more than 50 points each this year compared with 2010. Fini said one reason for the decline was that suppliers "did not seem impressed with the level of support they received from the two carmakers following the March 11 Japan earthquake."

But an even bigger reason for the drop, he said, is that there appears to be a structural change in the automakers' purchasing styles regarding pricing policies and global sourcing. He said that both are trying to increase their low-cost sourcing.

Benefits of good relations

Fini said that a score of 650 or higher on the SuRe index means relations between the two sides are starting to work. The supplier is more willing to open its books and collaborate with the automaker in finding cost reductions as well as ways to reduce waste and improve quality. The supplier does this because it feels it has the support of the automaker, the chance to continue growing and the chance to earn a fair margin.

"Over the last five years there has been a high correlation between operating income of carmakers and their respective SuRe index results," Fini said. "That means better relations with suppliers are linked to higher profitability for the OEM."

Finishing at the bottom of the ranking were Chery Automotive (365), Dongfeng Motor Group (428), SAIC Motor Corp. (433), BYD Co. (449) and FAW Group Corp. (456).

From Automotive News (A Crain publication)