Car makers need suppliers like flowers need bees. It's a way of life. Without suppliers that original equipment manufacturers can count on, the automotive industry could not exist. Major OEMs such as Chrysler Group L.L.C., Ford Motor Co. and Toyota Motor Corp. estimate at least 70 percent of their cost structures go to outsourced parts.
“We can't bring a vehicle to market without being able to count on our suppliers,” Ford Purchasing Chief Hau Thai-Tang said.
All three OEMs believe a strong relationship with their supply base gives them an advantage. And when growth is the end goal, any advantage that leads to the prize must be utilized.
“Supplier relations have become something that is very important to the industry,” said Sig Huber, director of supplier relations for Chrysler. “There is a lot more attention overall on supplier relations than there used to be. It's something that we take very seriously. Having those strong partnerships with suppliers gives us a competitive advantage.”
The 2009 recession didn't change the basics. Chrysler, Ford and Toyota each said safety, quality and delivery performance are mandatory for any supplier.
However, the downturn did force companies to re-evaluate capacity investments. Robert Young, Toyota's North American purchasing chief, said suppliers have been more selective in programs they are willing to support and in many cases removed capacity post-recession, something uncommon previously.
“I really don't think there's been a significant change as far as relationships,” Young said. “We work through those challenging times with suppliers. I'd say today there's much more discussion regarding capacity planning and forecasting. Suppliers are much more cautious in trying to make whatever type of investment they're making viable in the long term.”
But the recession that hit in 2009 wasn't the only problem. Major recalls also changed customer-supplier expectations—most notably, Toyota's unintended acceleration crisis in 2009 and General Motors Co.'s faulty ignition recall in 2014.