BIRMINGHAM, Mich.—One more sign that auto makers are under pressure from a spate of new industry challenges: Their relationships with suppliers have worsened.
A survey of parts companies for North America's biggest auto makers to be released this week finds that suppliers give their customers lower grades for relations than they did last year. The business barometer is significant because auto makers rely on their suppliers for cost improvements and technology advances, and unhappy suppliers can take breakthrough innovations to more favored customers.
But five of the six largest auto makers earned lower marks from their supply chains in the new North American Automotive OEM-Supplier Working Relations Index Study, conducted annually by Planning Perspectives Inc. of Birmingham.
Toyota Motor Co., the sole exception to this year's trend, improved from a year ago—but only slightly.
One big reason for this year's decline: Auto makers have let supplier relations sag as they cope with new business pressures, such as electrifying their products, exploring the frontiers of autonomous driving and bracing for the onslaught of new nontraditional competitors, said John Henke, president of Planning Perspectives and the survey's author.
"There's no single big reason for what's going on," Henke said. "Things have been going well, but they took their eye off the ball."
Ford Motor Co. fell to its lowest standing in nine years. Even General Motors Co., which has made a concerted effort over the past three years to improve with management changes and new supply chain policies, posted a setback.
Steve Kiefer, GM's senior vice president for global purchasing and supply chain, said he views his organization's decline more as a flat performance.
"And while we're disappointed in a flat performance, we've made meteoric improvements over the past three years," Kiefer said.
"What I'm most proud of on the study," he added, "is the measure that ranks GM at the top of the industry for working to build a more trusting relationship. That's something we've worked really hard on at GM over the past several years."
Suppliers ranked GM's "vice president of purchasing" at the industry's top spot on the measure of "working to build more trusting relations." GM's buyers tied for the top with Toyota's buyers on the same issue.
"To have complete alignment in the numbers between management and buyers wasn't the case just three years ago," Kiefer said.
But he acknowledged that the industry's purchasing departments have had their hands full tackling a wave of changes.
"There's a lot going on in the path to zero crashes and zero emissions and zero congestion," Kiefer said. "It's a lot of change."
Henke contends that poor supplier relations directly affect auto companies' bottom lines.
"It's costing them hundreds of millions of dollars," Henke said.
The study calculates that the decline in GM's ranking this year translates to $400 million in missed profit potential. Ford Motor Co.'s slide from a year ago translates to $600 million in missed profits, Henke said.
Fiat Chrysler fell deeper in its five-year decline in supplier relations, but worst was Nissan North America, where relations continued a steep four-year drop to the industry bottom, according to the report.
"Nissan has absolutely plummeted in the chart, and some of their suppliers have told us that they just don't like doing business with them," Henke said.
He said that the number of suppliers who said they agreed to parts price reductions because they were threatened with the loss of business was highest for Nissan and lowest for Toyota.
Nissan responded to the study with a statement saying: "Our suppliers have made significant contributions to Nissan's growth and will continue to play a key role in our shared success moving forward. Our management team looks forward to reviewing the full study results and are committed to identifying improvement opportunities for Nissan's supplier relations."
Henke said there is a nuance in explaining what suppliers don't like.
"It wasn't that the auto makers asked suppliers for price cuts. It was how they went about asking for them," he said of the supplier responses. "Price concessions are a negligible amount of money, compared to the contribution to profits that suppliers can make," Henke said.
Kiefer did not confirm the study's estimate of how relations specifically impacted GM's bottom line.
"But I definitely agree that improving supplier relationships can improve a company's performance and profitability," he said. "Just look at our record earnings at General Motors and our record supplier scores."