It's no secret that The Big 2.8 have been beating-up on their suppliers for decades, banking profits on the backs of their parts making "partners" by squeezing them for every possible penny (often at the cost of quality). Not to put too fine a point on it, relations between parts providers and American automakers are positively poisonous. So why is Reuters taking the automakers' side in their analysis of supplier – manufacturer relations post-Chrysler – Plastech blow-up? "And the stand-off between the companies will not be the last either, as U.S. automakers — looking to close plants, slash jobs and streamline operations to return to profits — lose patience with financially stressed suppliers." So how does scribe Ben Klayman reckon the suppliers became "stressed" in the first place? Anyway, "that hard line certainly caught suppliers' attention." Yes, but not in the way Klayman suggests. Suppliers are fed-up with Auburn Hill's late payments and now, bully-boy tactics. If they think Chrysler's pulling-out or going under, why wouldn't they get tough? Chrysler could soon learn that Hell hath no fury like a supplier scorned.
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This article proves something i have known for years now, the 2.8 are PROFIT driven where the European and Japanese are product driven. Of course the domestic 2.8 are squeezing their parts supplier “partners” for every penny possible and as was stated in this article at the expense of quality. Simmple lesson: CHEAP parts go in and a CHEAP badly built vehicle comes out !!!!!!! Is it any wonder the 2.8 are losing customers and market share the way they are as fast as they are???? They have the belief the customer MUST be dumb and or blind to think he/she won’t notice the cheap parts in a vehicle, but they ARE and that’s why they are leaving the 2.8 like rats fleeing from a sinking ship !!!!!!! And once a customer is lost it is DAMN near impossible to get them back no matter how much the product has improved !!!!!!!!!
Do the domestic share suppliers with the transplants? Perhaps TTAC could do the industry a favor and point out which suppliers seem to be making good parts.
Of course, that could cut both ways when two vehicles with parts from the same supplier show up and one was obviously specced for crap. Then you KNOW who gets the blame.
“the 2.8 are PROFIT driven”
Surely, you jest.
There is a lot of cross-pollination between domestics and transplants regarding suppliers, but most suppliers are majority of one or the other.
The Delphis and Visteons of the world would love to dump the big 3 NA OEMs and go with import/transplants but there just isn’t that much demand. There is surplus capacity for auto parts just like there is for autos.
The F*** the other fellow attitude that the domestic automakers have with their business partners otherwise known as suppliers and dealers is simply the same attitude they had with their end customers. Its the reason they are dying.
Its my opinion that you cannot genuinely only put yourself first in business and succeed long term.
You can’t simply have slogans, mottos and good pr people. They must allow for for the other fellow be it a supplier, an employee, a dealer or god forbid a customer to actually get some value that actually might come out of the domestic automakers pocket. You can’t simply try to screw everyone to your own advantage.
Landcrusher:
Plastech specifically supplies interior parts for GM’s Lambda triplets, and according to the press releases is also a Ford and Toyota supplier.
Is Plastech the source of the “supply problem” that GM is facing with the Enclave? Enclave production is limited due to some model specific interior pieces. Is Plastech the supplier?
It’s not the suppliers fault for any cheap products. They build things to specs. I remember a couple of years ago there was a story (on a different blog) about supplier problems. Interestingly, there was a commenter who worked at a plant that supplied catalytic converters to both Ford and VW. He said that the exact same parts went into both cars, but that Ford had much larger tolerances (in the case of cats it’s number of clogged pores). So they’d build the cats, test them in house, the good ones that met VWs specs got sent to VW and the crappy ones went to Ford since they didn’t care. Ford wanted to pay less for the cats, so they specified larger tolerances. I’m sure the same things goes on all the time. How many Delco alternators in Tacomas fail at 20,000 miles versus the same ones in GM Trucks?
If you push your suppliers to build the cheapest part you get cc devices from Texas Instruments, wiring that didn’t properly fix the recall of said cc devices, Firestone Wilderness ATX tires, etc.
It’s hard to pay a little and get a lot.
Relations between the domestics and suppliers have been adversarial for many years, but let’s remember, suppliers enter into contracts with the domestics at their own free will, they do not have to take the business and actually there are many who walk away. If I recall correctly an article I read, Jay Alix, a corporate turn around expert, has basically been quoted mentioning this fact.
Suppliers do need to share in some of the responsibility for the situations they get in. Many of these companies are run horribly (think plastech) and they are as much, if not more to blame for their predicament.
I don’t blame the partsmakers for quality failures.
If Chrysler was willing to pay for quality from Plastech, they would have gotten quality. Instead, they wanted cheap, so they got cheap. The same with all other suppliers. Which is why domestics have such crappy resales on passenger cars.
Sometimes suppliers take on contracts based on the OEM’s assessment of sales for a certain car promising good profits. If the sales of a car tanks after the initial launch surge, the supplier then finds he cannot make money on the actual sales of the vehicle. Suppliers to GM are well aware of this. There is one well known and respected supplier (who will remain nameless as I work there) that has been burned by this. The cars in question, Grand Prix and LoCrosse. Do you imagine that the suppliers contracted to supply parts for the Chevy SSR made much on that program?
GM Introduces New 2008 Line Of Layoffs
“Introducing the all-new, all-American GM layoffs,” announced General Motors chairman Rick Wagoner, gesturing toward a lineup of soon-to-be-released factory technicians outside the company’s main Detroit plant. “Bigger, bolder, more daring—these 2008 redundancies are sure to create a stir.”
http://www.theonion.com/content/news/gm_introduces_new_2008_line_of
Back in the 80s out sourcing was all the rage.The CAW/UAW fought it tooth and nail,we lost the battle.As we watched all the work vanish,they told us this is the free market you guys have priced yourself out of a job.Capitalism survival of the fittest,you name it.Fair enough we swallowed it.
Supplier plants started sprouting up everywhere.
A lot of folks got very rich very fast.Does Frank Stronach{Magna}come to mind?
Some of the suppliers were well run,some not.Some sent crappy parts, we sent them back.
Some smashed our containers we sent them the bill.
Some didn’t show up on time,and we had to shut down production.G.M.fired thier asses,same as they fire mine for lousy work.
I know that folks will doubt me when I say,our quality demands are as high as Honda/Toyota but its very true.I work and live this every day I don’t get my information from an auto blog.
Toyota and Honda are just as nasty with thier suppliers as GM but as usual the press gives them a free ride.
I guess if the big 2.8 or the transplants pull the plug on a supplier and it causes them go bellyup.Its a big blow to the workers and my heart goes out to them.As far as the greedy bastards that run it.Call it freemarket or capitalism, survival of the fittest,or just plain lousy management
mikey:
Toyota and Honda are just as nasty with thier suppliers as GM but as usual the press gives them a free ride.
How do you know this? We have no such information. If we DID, do you really think we’d pull our punches? Let me answer that for you: no.
oboylepr:So your saying G.M.should just eat your extra parts,cause you counted on selling more Grand Prixs and LaCrosse than GM sells?
Yeah well a lot of us counted on selling more Grand Prixs.It didn’t work out so well for us either.
RF: I know if TTAC had the info TTAC would be all over it.But you also know how tight with info HONDA is.Image is everything to HONDA and it seems to have worked fairly good for them.Any body notice how Toyota is taking a beating lately?
Quality, waranty, reliability all getting reported.Any negative on Honda? never.
Toyota and Honda are just as nasty with thier suppliers as GM but as usual the press gives them a free ride.
The recent situation between Chrysler and Plastech aside (and issue between Navistar and Ford being far beyond anything normal in supplier relations), the problem is not necessarily that an automaker is nasty to their supplier but they put a lot of price pressure on them – and they do it in different ways (or used to, anyhow).
For example, Ford and GM historically have been working with a set of suppliers that were either created by Ford and GM or part of the company and then spun off. Suppliers worked typically with one company and faced the same high labor costs as Ford or GM. Toyota comes along and starts working in a different manner (which I’ll point out Ford and GM have started adopting en masse). This is where the Toyota helps an existing supplier build an efficient JIT operation with the cooperation of the automaker or starts a supplier under the Toyota model. Many Toyota supplier plants weren’t unionized or had much more favorable contract terms because they were newer. So, not only were they deadly efficient from the get-go, they had lower labor costs. There was no way for Ford and GM to compete in the long run. So, they start getting cheaper and cheaper on the supplier… and basically bully them to pricing levels because of the implications that losing Ford’s or GM’s business had.
Now, Toyta’s suppliers are more similarly unionized compared with the Big 2.8’s base as Toyota has tried to bring on suppliers more quickly than before to support its growth, reaching to the outside. There is also less cooperation in these situations than Toyota-grown suppliers and the use of lower-quality materials and standards has allowed Toyota (a profit driven company – don’t fool yourself) to maintain its margins, but lose some points in recent quality metrics.
Ford and GM now work more like Toyota does, pushing for lower costs by working more closely with the suppliers to fulfill those requirements. Slowly – very slowly – the cost of parts at Ford and GM has come more in line with Toyota’s and Honda’s while the quality of those parts and the working relationship between the companies have improved.
It will still be probably 3-5 years before suppliers view the Ford and GM as positively as they view Toyota and Honda, but that could change even faster if Toyota and Honda start squeezing more as they lose pricing power and try to make up for a recent decline (or at least plateau-ing) in part quality.
I leave Chrysler off this conversation completely because after their recent spat with Plastech, I cannot even tell you if they will be in business in 3-5 years.
This is all about profit, ultimately, and Toyota and Honda are not immune to it somehow. They push their suppliers as hard for cost-cuts as possible, but they have just used different tactics in the past. As Ford and GM restructure and change, Toyota and Honda will lose their lead in this key category as well.
Landcrusher :
February 8th, 2008 at 11:21 am
Do the domestic share suppliers with the transplants? Perhaps TTAC could do the industry a favor and point out which suppliers seem to be making good parts.
Of course, that could cut both ways when two vehicles with parts from the same supplier show up and one was obviously specced for crap. Then you KNOW who gets the blame.
I’ve read multiple stories where an employee compares how a Detroit Three automaker treats them compared to Honda or Toyota. The Detroit Three bitch about price and try to get the parts as cheap as possible, but don’t really care much about defects. Honda or Toyota will reject a whole shipment if they find just a few defective parts. Kind of shows the whole philosophy differences between the two.
I call shenanigans....
Works as an corporate quality engineer for 3 years a a major NOEM supplier(L). Had work with GM, Honda, and Hyundai. It\'s all plant specific.
GM Oshawa is a yeller....they don\'t work with you to fix any problems...they just yell at you to fix it....
Honda definitely works WITH you during the 8d(5Y) process and tries to come to better solution with engineering background.
Just my 2 cents, but when GM came a calling, nobody picked up because of their irrational behavior. Dealing with GM hecho en mexico(Silao, Saltillo) was even worse.
Looks like the domestics could use Thomas Stallkamp again.
oboylepr:So your saying G.M.should just eat your extra parts,cause you counted on selling more Grand Prixs and LaCrosse than GM sells?
I suggest you go back and read the post, I said nothing of the sort. What I did say was GM’s projections over the life of these programs was over optimistic. This does affect a suppliers decision on whether to take a supply contract. If you were a supplier asked to tender a unit price for gizmos for the Pontiac Next Big Thing, you would at the very least ask, ‘How many of these do you expect to sell over the next 4 years” BTW, your assertion that Toyota and Honda are just as hard on suppliers is inaccurate. There is a world of a difference between the way T & H treat their suppliers versus GM. With T & H it is a partnership, with GM the supplier is a punch bag.
I have seen outrageous behavior from the big 2.8 in their treatment of suppliers. It was not just about price either. Many times a late design change or test failure would result in absolute shouting at the supplier and brutal daily meetings. I saw conduct from high level managers directed at hard working and extremely competant supplier engineers that borders on criminal. In recent times that kind of behavior did mostly go away and a much more pro-active and collaborative approach was taken.
There’s so much smoke about Detroit’s brutal treatment of suppliers, there must be fire as well. Which is not surprising. GM/F/C are all struggling so there’s tremendous pressure on them to drive down costs. I wonder if the atmosphere isn’t even more toxic inside the 2.8, with each level of management mercilessly bashing the one below. But it’s easier to learn about the inner workings of the CIA than of the fraticidal convulsions inside corporations.
Monopsony can be as brutal as monopoly. There was a government central service agency that got its funding by billing other agencies for services it provided. The biggest of the client agencies would “forget” to pay its bill when it was displeased with the service agency’s policies. When the latter got to the verge of missing a payroll, the usual result was a change of policy and a hastily processed payable.
Geotpf:
“The Detroit Three bitch about price and try to get the parts as cheap as possible, but don’t really care much about defects. Honda or Toyota will reject a whole shipment if they find just a few defective parts. Kind of shows the whole philosophy differences between the two.”
No wonder the domestic 2.8 are having so many recalls. CRAP goes in, CRAP comes out. The finished product is ONLY as GOOD as it’s parts.
When the domestic 3 request a quote, it is in terms of, you WILL quote to this quantity. You WILL tool up to deliver this quantity, and your production rate will exceed capacity. And they won’t ever agree to a higher piece price if quantities never materialize. And then they come after you with ‘mandatory’ percentage price cuts, despite never having reached the promised quantities.
Then they come up with changes that result in extra cost, but they refuse to pay any extra charges, unless you have them in a position where they can’t easily pull the work, and you are willing to risk your entire relationship with them.
Then they pay late and sometimes not at all, just stonewalling attempts to get paid for work that was delivered satisfactorily under a purchase order.
They demand certification to quality standards, but with enough kickbacks to the right people, will give the work to shops that don’t have the certification.
Meanwhile, they are not lying about their plans for the future; every week or two, you see articles where they announce basically that every spare dollar they get is being invested outside the reach of the U.S. government and the UAW. NO new investment is being made inside the U.S. And they are walking away from their domestic supplier base as well, moving every possible part out as soon as possible. It takes a long time, but they have been at it for years.
And let’s not forget the occasional bout of insane policies. Plastech was formed in 1988 as a ‘minority’ company to cash in on minority preferences. Count that for whatever it’s worth to you.
Toyota, on the other hand, is sourcing its pickup trucks, parts and all, in the U.S. They ask you to quote a quantity, and they build to that quantity, period. They do not impose their own quality standard certification, but they audit from a very thorough questionnaire that assures that any decent quality program can comply. They send competent engineers to perform audits and to assist in launch issues. They are completely thorough, know all of the right questions to ask, are diligent, always follow up, and are polite to a fault. They engineer things so carefully that changes are rare, but if they ask for something that will affect cost, they will get it quoted and pay for it. They don’t come demanding cuts in price, they stick to the original deal. And they pay on time for services delivered.
Times aren’t what they used to be. There are lower taxes and less regulation in communist countries than here in the U.S. So things are being made there. There is no reason whatever to have any loyalty to ‘domestic’ automakers any more. As publicly owned companies, there is no motivation to do anything except try to hold the value of the stock. And it isn’t even their own money they play with. So they have been maneuvering themselves into a position where the continued decline of the U.S. economy and increasing regulation, costs, taxes, and unions can no longer threaten their existence.
It’ll be interesting to see how long it takes for our economy to climb out of the coming recession. This time, the productive sectors of the economy have been decimated, while government spending will continue unabated despite falling revenue, further debasing the currency. All of that consumption eventually gets paid from somewhere that someone makes or grows something. With so much less productive work going on, the attempt will be made to finance it all with created fiat money. It’ll be interesting to watch and see whether there are enough of us left working to pull it off. If not, watch out for a Depression.
The big problem companies like Plastech have is that their customers have insisted on firm price contracts when the raw materials costs have skyrocketed. Plastic resin prices pretty much follow the cost of crude oil.
There are only so many efficiency improvements a factory can make and it is quite possible for raw materials cost increases to consume more than the factory is able to save.
Many people don’t realize that the Chinese government directly subsidizes the price of fuels inside China and gives export rebates to it’s exporting companies. Thus it is possible for a Chinese supplier to quote finished products at less than the international market price for just the raw materials going into that product. For example, look at: http://www.business-in-asia.com/news/plastic_news3.html
When automakers push domestic suppliers to meet the “world price” (aka China Price) there really is no place for them to go, except to close up shop and send the equipment to China. Is that really in the long term best interest of the US and it’s people?
“So they have been maneuvering themselves into a position where the continued decline of the U.S. economy and increasing regulation, costs, taxes, and unions can no longer threaten their existence.”
Ironically it is the lessor quality that results from those very same practices and manuvering that will threaten their existence. Yet, companies like Chrysler still wonder why many consumers have either sworn off their products or stay loyal yo Toyota and Honda.
Not only is there a good chance they won’t survive but frankly with their callous aand predatory practices, they don’t deserve to survive.
I don’t remember the book or even the author, but it was one of the books by Michelle Maynard or MaryAnn Keller, and in the book the author described being in a meeting of GM contract/engineer people who were laughing about how they’d screwed over a supplier on prices. Not exactly a cooperative and constructive attitude.
The Dec. 24, ’07 issue of AutoNews (page 8) has a short article about Bennie Fowler who is Ford’s VP for quality. Some quotes:
—
(Interviewer)”A few years ago, a supplier described you to me this way: ‘He’s big, he’s all muscle; a better job description for him would be vice president of ass-kicking.’
(Fowler) “The one thing I’m fortunate to have is I’m 6-4, and I’m 280 pounds. Sometimes when people see me, I don’t have to say a word. Their thoughts are just like you mention.”
—
Now in the Jan. 28, ’08 issue of AutoNews (page 8) we have an article about Ford being dead last in supplier ratings according to a J.D. Power survey. Mulally says he’s going to fix it.
Fowler comes across as a bully, and a bully has no place in job like he has. This can’t be news to those above him, so it seems to me his bullying attitude is reflective of his bosses.
Toyota and Honda are just as nasty with thier suppliers…
I’m sorry but this simply isn’t true.
I’ve even heard stories from managers (outside of Toyota) where Toyota have paid a supplier MORE MONEY because they felt that supplier couldn’t maintain that margin for too long. I thought this was rubbish until the manager said “They did it because they don’t want a supplier going bust and stopping their lines”. Made sense. I work for a company who supplies Honda and Toyota in the UK directly and they are very, very, very, very, very, very, very, very strict when it comes to specifications and procedure. Now, in order to maintain my professionalism, I cannot divulge too much information, but trust me when I say this:
When Toyota and/or Honda establish a specification for a product, if you so much as change the machinery which you make the product in, Toyota and Honda demand to be kept abreast of this change….and I’m not joking.
We also supply GM and Ford and their attitude is pretty much “As long as it turns up, we’re happy.” and for those interested, Ford are a flipping nightmare for paying their bills!
For the record, I do think that Toyota and Honda’s requirements do go a bit far, but they’re clearly doing something better than GM and Ford…..