Going to make on demand price reductions on EV’s a challenge Liz.
“The primary driver behind the largest WRI point gains is sharing risk and cost in an equitable manner while relentlessly pursuing cost reduction,” says Plante Moran automotive and mobility consultant Dave Andrea.
Toyota again earns the highest score and Ford drops sharply in the Plante Moran consultancy’s annual North American Automotive OEM - Supplier Working Relations Index (WRI) Study that evaluates relations between six U.S. automakers and their suppliers.
Five of the six automakers scored higher this year than in 2023, led by Toyota with 368. Honda was second with a score of 344, followed by General Motors (299) and Nissan (255). Ford dropped 22 points to 197, its fourth consecutive year of decline, while Stellantis gained seven points but again finished last with 152.
Toyota and Nissan both raised their scores by 30 points from 2023, more than any other automaker; Toyota’s 368 was its highest score since 2007, when it reached 415. Honda’s 344 was its highest mark since at least 2014.
The Working Relations Index measures the total commercial relationship on a X-X-point scale, based on perceived trust, timely communication, mutual profit opportunity, assistance and a reduction in friction in suppliers’ dealings with automakers, Plante Moran says.
“With all the challenges and conflicts facing suppliers this past year, it’s not surprising that some automakers dropped even further in their scores. But what might be surprising to some is that several automakers improved their scores significantly during the past year,” says Dave Andrea, Principal in Plante Moran’s Strategy and Automotive & Mobility Consulting Practice. “This shows that piece price economics alone is not what drives the automakers’ WRI score but that the score also reflects the tangible and intangible costs to serve the OEMs.
Dave Andrea Plante Moran.jpg“The primary driver behind the largest WRI point gains is sharing risk and cost in an equitable manner while relentlessly pursuing cost reduction,” says Andrea. “This will enhance the mutual long-term financial and innovative capability of the customer and the supplier. OEMs doing this best integrate their suppliers into their corporate strategy and keep WRI-related principles front and center in their dealings."
Toyota, Honda and GM all see suppliers as essential components of their success, Andrea says. Those three automakers are rated highest in maintaining fairness with their suppliers in a time of upheaval marked by the transition to electric vehicles and supply-chain disruptions, he says.
Ford saw its score drop by 70 points since 2014 as it continued to be plagued by negative perceptions, Andrea says. Going “all-in” on EVs by creating the Model E business division has led to “a lot of organizational churn, a lot of internal confusion,” he says.
The Dearborn, MI, automaker’s WRI score also reflects the influences of engineering, manufacturing and product development on supplier relations, the consultant says.
The three top-scoring automakers also were perceived as communicating most transparently with their suppliers, Andrea says. The six OEMs’ overall WRI scores, led by Toyota, corresponded exactly to their ratings for timely communication.
“Neither side knows the market, so when issues come up it’s like one party doesn’t always have to win,” Andrea says. The highest-scoring automakers make a concerted effort to include suppliers in their strategies and create expectations for a reasonable return on investment, he says.
Plante Moran conducted the 24th annual Working Relations Index Study from mid-February to mid-April, surveying 696 executives from 429 Tier 1 suppliers serving Ford, GM, Honda, Nissan, Stellantis and Toyota. The executives rated their relations with their automaker customers across eight major purchasing areas broken down into 20 commodity areas.