Opinion - Automakers still must work on supplier relations

This opinion piece was printed in this week's issue of Automotive News Europe

London -Automotive suppliers believe their automaker customers could improve in many ways.

In the third annual Automotive News Europe/SupplierBusiness poll of supplier relations, parts makers said car manufacturers are too harsh in demanding price cuts on parts, unwilling to reward suppliers for cost-saving innovations and too willing to share suppliers' intellectual property with outsiders.

Yes, a poll of only suppliers and not automakers is one-sided. And suppliers always complain about automakers.

But one thing is crystal clear: Suppliers are unhappy.

The more worrying aspect is what suppliers feel bad about. In this poll, suppliers are not so much angry at automakers as worried about the automakers' futures and their own.

The biggest change was on key, forward-looking factors: the attractiveness of automakers to work with, the long-term prospects of those automakers and the potential to do more business with them three years from now. On each count, suppliers are more pessimistic than a year ago.

They see fewer automakers as attractive to work with and even the ones they prefer they view less positively. They believe automakers have a bleaker future. And while they retain the eternal optimism of suppliers - they see continued growth for their own company - they are less certain of more business with specific automakers.

This is a bad development. Automakers are increasingly dependent on their suppliers. Yet this result reverses an improvement in automaker-supplier relations reflected in last year's poll.

After the turmoil of 2005 - sharply rising raw-material prices, enormous pricing pressure and a perception that manufacturers were unfairly using online auctions - suppliers were in a rebellious mood.

After many automakers changed their purchasing policies and procedures, last year's poll showed suppliers perceived an improvement in relations.

That feeling did not last.

Manufacturers and suppliers need strong relationships to enter and prosper in new markets. But those have been strained rather than strengthened by cost-cutting in the mature markets.

There is hope for improved relations. The balance between the two sides has become more even. Having outsourced technology to suppliers, automakers have learned that suppliers give the latest features to their favored customers first. That reduces the automakers' traditional clout on pricing.

And if suppliers are right that things are getting tougher, then automakers and suppliers have even more incentive to work better together.

A bad relationship just adds to the problems the industry has. Automakers must be tough, but they should also redouble efforts to improve relations with their suppliers.

From Automotive News Europe (A Crain publication)