October 7, 2004

Relationship between North American automakers and suppliers “strained” – study

Detroit, Michigan – Auto suppliers say their relationships with North American automobile manufacturers are more strained, due largely to an unrelenting focus on cost reduction, according to a new study from global management consulting firm A.T. Kearney.

Forty-four percent of automaker and supplier executives polled in the study characterized their relationships with each other as “strained.” By contrast, supplier executives characterize their relationships with Asian auto manufacturers more positively, due to the more-collaborative approach taken by Asian OEMs.

“The less than satisfactory relationships between the OEMs and suppliers
are not a new development. But, we know from talking with both sides that
things have not gotten better over the past several years,” said Dan Oxyer,
vice president in A.T. Kearney’s North American automotive practice and one of
the study’s authors.

A.T. Kearney’s research found the reasons most negatively impacting
automaker-supplier relationships included the focus on short term price
reductions; lack of appreciation for actual costs to deliver world-class
quality, durability and reliability; increased competition among suppliers
based on price; and a lack of standard methods for dealing with and
considering supplier technology, tooling and related development costs.

The study also revealed that relations between suppliers and the North
American auto companies were more problematic than those between suppliers and
Asian automakers.

“Everything points to the importance of improving automaker-supplier
relationships. As the suppliers take on more responsibility for the vehicle,
it’s going to be critical that both sides overcome their differences. Without
significant upgrading of these relationships, it will be difficult for either
side to maintain the level of competitiveness required in today’s global
market,” said Oxyer.

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