Auto supplier sentiment has notably declined in recent years, particularly among key industry players such as Ford Motor Co., Stellantis NV, and Nissan Motor Co. Ltd. This trend raises concerns regarding the automakers’ capacity to navigate the evolving landscape shaped by shifting trade policies and their consequential impacts on supply chains. According to the latest annual Working Relations Index released by financial consultancy Plante & Moran, survey responses from 665 executives across 398 Tier 1 suppliers indicate a critical need for improvement in these manufacturers’ supplier relationships.
The survey, conducted from mid-February to mid-April, coincided with significant tariff changes initiated by former President Donald Trump, which imposed a 25% duty on various auto imports, particularly those from Canada and Mexico. These tariffs have implications not only for supplier sentiment but also for overall production costs, potentially leading to higher vehicle prices amidst a climate of economic uncertainty. The increasing costs associated with tariffs are prompting automakers to reassess their inventory and long-term production strategies, aiming to mitigate the economic impact on consumers and their own operations.
In contrast to the declining scores of Ford, Stellantis, and Nissan, competitors such as General Motors Co., Toyota Motor Corp., and Honda Motor Co. Ltd. have experienced growth in their supplier relations. Toyota achieved the highest index score at 386, significantly improving by 18 points from the previous year. Honda and GM also reporting increases, with scores of 347 and 310, respectively. The effective communication and collaboration strategies employed by these firms are believed to be vital in managing the challenges posed by tariffs and the transition to electric vehicles.
Angela Johnson, principal at Plante Moran, highlighted the importance of strong supplier relationships, stating, “The suppliers put their best resources on programmes that have the stronger relationships.” This sentiment is echoed by Dave Andrea, a principal in Plante Moran’s consulting practice, who emphasised that maintaining positive engagements can lead to competitive advantages, such as enhanced innovation access and reduced operating costs.
Scrutiny of Ford and Stellantis reveals significant hurdles in their supplier relations. Ford, in particular, has seen a dramatic decline, scoring just 191 this year, a staggering 70 points down over the past decade. Critics have pointed to insufficient communication regarding long-term strategy and organization complexities, particularly due to parts of its purchasing operations being situated in India, which can complicate supplier interactions. Moreover, Ford’s decision to cancel and delay several electric vehicle programmes has not aided its standing among suppliers.
Stellantis, facing its own challenges, has dealt with declining vehicle sales and financial results, compounded by significant leadership changes. Efforts to reduce dealer inventory, though necessary, have raised concerns among suppliers regarding the automaker’s stability and predictability. Although Stellantis has shown some improvement in interdepartmental collaboration, the balance of strategy remains crucial for sustaining supplier trust.
Nissan’s difficulties stem from recent leadership issues and failed merger discussions with Honda, further diminishing its supplier rapport. In light of the company’s recent struggles, a spokesperson remarked on the necessity of their supplier relationships, indicating a focus on continuous engagement and alignment.
Meanwhile, the top three automakers have demonstrated a successful approach to equitable cost and risk-sharing. This strategy not only aids in fostering trust but also enhances feedback from suppliers about operational needs amid the common pressures of parts shortages and transitioning to electric mobility. The positive changes observed in GM’s approach over the last decade are notable, marking an 86-point rise in the index. Jeff Morrison, GM’s global chief procurement officer, underscored their commitment to strengthening supplier relations through consistent communication and collaboration.
Despite the struggles faced by some automakers, the exercise of open dialogue and trust-building remains critical in the automotive industry, where the flow of information and resources significantly impacts overall production efficiency and market competitiveness. As the landscape evolves with the rise of electric vehicles and new regulatory environments, the necessity for automakers to prioritise supplier relationships is more pronounced than ever. Moving forward, both successful and struggling manufacturers will need to adapt their strategies to nurture these vital connections.
Reference Map:
1. Paragraph 1, 2, 3, 4, 5, 6, 7, 8
2. Paragraph 3
3. Paragraph 6
4. Paragraph 2, 5, 7
5. Paragraph 2, 4
6. Paragraph 6
7. Paragraph 7
Source: Noah Wire Services
Subscribe to Industry Updates
