According to a survey from Tier 1 automotive suppliers, of all of the automakers in US, General Motors is the worst to work for. However, take a look at the recent dramas GM has got itself into: the ignition switch recall and the scandal behind it. I have written a blogpost about this scandal in the past. There are indications that GM approved the design of the ignition switch although it did not meet the standards in 2002. This is not the type of company people want to buy cars from. I would think the responsibility for the recall should fall on GM and NHTSA because both organizations were aware of this matter long before the recall and neither decided to do anything until this year. Most suppliers have issues with communications and they question GM’s integrity. Among GM’s competitors, Chrysler finished the fifth in the survey and Ford finished the third. Within the expectation, international competitors, Toyota and Honda, are the first and second place.
I think automaker-supplier relationship is a very interesting aspect that I never noticed. The increasing popularity of international automakers (mostly Japanese) among the market of suppliers might signify a more international friendly automaker-supplier relationship as contrast to a deteriorating relationship between US automaker and suppliers.
The tier 1 suppliers were something almost unknown to me at the beginning of this class; now it is really interesting to see the relationships between these and the car manufacturers. With problems like the recalls these two would always try to blame eachother to protect their reputations and or against liabilities in case of accidents. But, in the end these two industries need eachother to succeed.
I’m not sure how much it matters whether or not the suppliers like the OEMs. Suppliers need the business, regardless of how enjoyable the business is with the OEM. It’s interesting to see the dynamics of these business relationships, however.
I think the problem for the Detroit 3, especially for GM, is not that suppliers not working with them. It’s about the cost. Most American automakers, when compared with European carmakers, is competitive in their pricing. If this relationship keeps going south, suppliers might become hard to negotiate price and that will affect GMs’ pricing strategies of their cars.
It would be tough for a Tier 1 supplier to respond to an OEM in a way where they could fight back without the OEM going elsewhere to purchase their parts. The OEM has the power in this case. The suppliers only have a few customers so losing one would be a major hit to their revenue. Although GM may be a real nuisance to deal with, the suppliers don’t really have many options.
In response to some comments saying that the tier 1 suppliers are at the mercy of the OEM’s I beg a bit of a difference there. In most cases these suppliers, like Borg Warner, have a very diversified portfolio of companies they service, yet the OEM’s receive crucial parts for their vehicles from a market of only one or two suppliers. Therefore, I am of the opinion that in fact Tier 1 suppliers do hold a deal of clout when bargaining with OEM’s, and the relationship maintained between the two is certainly important to both companies.