Year in Review: Supplier, OEM relationships take a hit in 2018

Supplier relationships with auto makers appeared to have worsened in 2018.

At least that's what one major barometer—The Working Relations Index Study by Planning Perspectives Inc.—concluded in May, stating that five of the six major auto makers earned lower marks from their supply chains.

Toyota Motor Co. was the only OEM to improve from 2017, albeit slightly, while Honda only dropped nine points compared to its 2018 rating—and was the only other OEM to score at least 300 points.

Planning Perspectives President John Henke said in May one big reason for the decline in 2018 was that auto makers let supplier relations loosen as they cope with new business pressures like electric and autonomous vehicles, while bracing for a slew of nontraditional competitors entering their industry.

Ford Motor Co. fell to its lowest standing in nine years—a 250 score, the lowest cutoff for "adequate"—and General Motors Co. posted a setback after making a focused effort to improve those relations during the last three years with management changes and new policies.

GM did get a piece of good news: Steve Kiefer, the firm's vice president for global purchasing and supply chain, was No. 1 in terms of "working to build more trusting relations." GM's buyers tied for the top with Toyota's on the same issue.

Both Fiat Chrysler and Nissan North America received a "very poor" rating, as FCA's score dropped for the fifth straight year and Nissan continued its plunge toward the bottom, posting its fourth straight decline at 182, the first score of less than 200 since 2010.

Poor supplier relations are costing OEMs hundreds of millions of dollars, according to Henke, translating GM's decline in the survey to about $600 million of missed profits.

Sealing up China

Two deals in China helped Toyoda Gosei Co. Ltd. enhance its footprint for weatherstrips in the region.

In March, it acquired Tianjin Star Light Rubber & Plastic Co., which provides weatherstrips to Tianjin FAW, Toyota Motor, Changan Ford and Great Wall Motor, with $75 million in sales in 2017.

Then in October, the firm acquired a 60 percent stake in Hubei Rock Rubber and Seal Technology Co. Ltd. for about $7.12 million, bringing it a significant new customer in Dongfeng Motor Corp., a company TG said is one of China's "big three" auto makers.

The moves give Toyoda Gosei four weatherstrip manufacturing plants in China and covers all major regions of the country.

Branching out

One automotive supplier that's going to look a little different going forward is Cooper Standard Automotive Inc., which made a couple of big deals to reshape the makeup of its product portfolio.

The Novi, Mich.-based firm made a significant investment toward its goal of diversifying beyond the automotive industry, acquiring Lauren Manufacturing and Lauren Plastics in July for an undisclosed amount. The firm has set a goal for 25-30 percent of its revenue to come from non-automotive applications within the 2023-25 time period. Its Advanced Technology Group accounted for less than 5 percent of Cooper's $3.62 billion in consolidated 2017 sales.

It also is divesting one of its four core product lines, reaching a deal to sell its Anti-Vibration Systems unit to Continental A.G. for $265.5 million in November. The move will help ContiTech's Vibration Controls business complete its global footprint while giving Cooper Standard more capital to invest in other areas of the business and further expand into non-automotive.

Cooper Standard was busy adding to its core capabilities, too, agreeing to acquire 80 percent of South Korea-based LS Mtron's automotive parts business, which produces jounce brake lines and charge air cooling technology to complement Cooper Standard's current fuel and brake delivery systems unit.

The firm also added Hutchings Automotive Products in the third quarter, also enhancing its fuel and brake presence.

Auto show shifts gears

One of the auto industry's biggest shows will occur in January for the last time in 2019.

The Detroit auto show disclosed plans to move from the dead of winter to early June beginning in 2020. The move, according to the Detroit Auto Dealers Association, will save auto makers money by reducing move-in costs by 30-40 percent and cut setup time to three weeks from an average of eight weeks.

Exhibitors would also not need to pay overtime for the Thanksgiving, Christmas and New Year's holidays.

Ford and GM had positive reactions to the move, but it remains to be seen if it will be enough to curb auto makers from revealing their latest models at other venues.

Vibracoustic considers IPO

Continental A.G. isn't the only automotive supplier considering an IPO for one of its units.

Freudenberg is discussing an initial public offering for Vibracoustic, according to Group CEO Mohsen Sohi, who said in April that the firm will explore options for the anti-vibration parts company later in 2018.

The firm stressed that an IPO would be possible in 2019, but not before then. Freudenberg is more than two years removed from buying out its joint venture partner Trelleborg A.B., assuming full control of the venture in July of 2016.

Vibracoustic is still well-positioned to make acquisitions, Freudenberg said it has about $3.17 billion in cash on hand with sales of $2.56 billion in 2017, also employing nearly 10,000 people.