Visit Our Sponsors
Highlights of this year's study include:
• Nearly 75 percent of car makers have received lower ratings than in 2013, with an average supplier relations, or SuRe, index rating reduction of 2.8 percent. Profit potential ratings were down by 5.4 percent on average in 2014 vs. 2013.
• Toyota’s marginal improvement in 2014 is enough to secure the Japanese car maker the first position in the SuRe index ranking, closely followed by BMW, which was also rated second in 2013. Despite occupying the top positions, both BMW’s and Toyota’s ratings remain significantly down compared to 2006 and 2007 highs (712 and 697 in the SuRe index scale, respectively), confirming a shift in the way they handle relations with suppliers.
• Ratings for Hyundai, Kia and Volkswagen (and its controlled brands) suggest suppliers are less confident about their opportunities to win more business with these car makers in the future, possibly linked to reduced growth prospects.
• OEMs pushing the boundaries of cost reduction with several suppliers highlighting the return to unwelcome practices, such as annual price reduction targets, which they deem unsustainable.
• Jaguar Land Rover was named Most Trustworthy. Jaguar Land Rover, PSA and Chinese car makers, Great Wall in particular, are among the winners of this year’s study, all for different reasons. With a 16 percent improvement in 2014, Jaguar Land Rover establishes itself as the most trustworthy OEM.
• OEMs’ Lukewarm Response to Global Recalls and Quality Management Misalignments. One supplier put it bluntly: “It’s all about cost – is purchasing or engineering leading quality?”
With few exceptions, even the best-performing car makers have become more stringent on controlling costs in 2014, signaling a general shift for the OEMs towards greater cost focus and more aggressive ways to capitalize on their negotiation leverage with suppliers. For example, Jaguar Land Rover, which seems to offer the highest profit opportunity for suppliers based on the metrics of the study, has seen its Profit Potential rating drop by nearly two percent vs. 2013.
Ratings are based on the SuRe index scale, a comprehensive performance metric of the quality of relationship between suppliers and OEMs defined by IHS Automotive.
Several suppliers have highlighted the return to unwelcome practices, such as setting annual price reduction targets, which they deem unsustainable. While the standard annual price reduction in the industry hovers around two to three percent, it is not uncommon for OEMs to request cuts of 5 percent year over year, and in some extreme cases, as much as 10 percent. Suppliers seem to accept the notion that they have to find innovative ways to generate savings on a year-over-year basis, however they find it difficult to accept that they receive little or no support from the OEMs in doing so. This lack of support often results in strained relations between the two parties, therefore resulting in lower ratings in the IHS Automotive survey.
The survey results also show OEMs seem also keen to extract more savings from suppliers. However, savings are not always being pursued with a collaborative spirit. Expanded product liability guarantees and a greater financial burden in the event of recalls are among the other concerns that are impacting suppliers’ perception of their Profit Potential with the OEMs.
Source: IHS Automotive
Enjoy curated articles directly to your inbox.