| 10:49 AM EST

What Would Michael Corleone Do?

#Toyota #Ford #Honda


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“It’s not personal . . . It’s strictly business.”

That, some of you will recognize, is a line delivered by Al Pacino as Michael Corleone in The Godfather.

And some people in this industry operate as though their interactions with other people aren’t personal, but all about getting things done, regardless of any sort of positive relationship that may or may not occur as a result.

John Henke not only thinks this approach is short-sighted and can cost an organization big money—as in tens of millions of dollars—Henke, president of Planning Perspectives (ppi1.com), knows this, and has the data to support it.

Henke and his team do the annual North American Automotive OEM-Supplier Working Relations Index Study, now in its 17th year. They accumulated data from 652 sales persons from 108 Tier 1 suppliers, which represent 64 percent of the annual buy of GM, Ford, FCA, Toyota, Honda and Nissan; the suppliers are 40 of the top 50 North American suppliers, so these are people who are of the utmost importance vis-à-vis getting cars and trucks out the door—to determine how well those relations are going for the six OEMs. They look at five overall areas—OEM Supplier Relationship; OEM Communication; OEM Help; OEM Hindrance; Supplier Profit Opportunity—within six purchasing functions: Body-in-white; Chassis; Electrical/electronic; Exterior; Interior; Powertrain. All of which is to say that they’ve got it covered when it comes to the essential elements for developing and building products.

At the risk of burying the lead, listen to Henke: “We perform to how we’re measured. If you’re in purchasing and you’re measured on taking 10 percent out of your annual buy, your immediate thought is, ‘I know how to do that.’” Doing that might simply be beating down the supplier on price. Less for him; more for you. “But if you’re also measured on improving relations, suddenly there’s a whole new dynamic that comes to mind as to what you can do to achieve both.

“If that performance metric about improving relations isn’t there”—if it is simply the Michael Corleone approach—“then you’re going to be as nasty and mean as you can to get that 
cost down.”

You win; they lose.

So here’s the fundamental headline: “Toyota Maintains Lead It’s Held Since 2011; GM Passes Ford for Third for the First Time.”

Here’s the subhead: “FCA Maintains Its Poor Position; Nissan Plummets to Bottom.”

Looked at numerically, the companies achieved the following ratings: Toyota, 328; Honda, 319; GM, 290; Ford, 270; FCA, 218; Nissan, 203.

Henke says that he’s surprised that Toyota and Honda didn’t do better; both slipped from last year, both by four points. He reckons this is because of some changes in personnel and these new people haven’t wholly internalized the approaches to relations that have had those two companies at the top of the rankings for the past 17 years. 

He says he’s pleased to see how GM has made gains, up 40 points compared to last year, because he knows they’ve been working at it. And he thinks that they’re going to be redoubling efforts in Dearborn as the crosstown rival has such momentum: Ford gained just three points compared with last year.

As for FCA and Nissan: Well, it probably goes to the point of what their people are measured on.

Again, this is not some Pollyanna it’s nice to be nice study. Henke explains that being preferred by suppliers is exceedingly important to the fortunes of the OEMs. While it once may have been the case that the customer is king, Henke suggests that the executives at many supplier companies are now sophisticated enough to understand there is business worth having and some that isn’t. And he says that preferred customers get the suppliers’ A teams. “To what extent,” Henke rhetorically asks, “does a supplier provide its best resources to an OEM and go beyond contractual obligations to meet its needs?”

It isn’t just a matter of Purchasing. Engineering also plays a role in the relationships—Engineering at both the OEM and supplier companies. Henke suggests that one of the reasons why Toyota and Honda have consistently performed well in the study is because they both have engineering teams that are engaged with, not adversarial toward, their opposite numbers. And they aren’t afraid of “not-invented-here.” And as there are advances in technology—think of the requirements for automated driver assistance systems and beyond—NIH is something companies can no longer afford.

The Godfather came out in 1972. A lot has changed since then. But does everyone understand that?