By Kevin Meyer
A hallmark characteristic of GM, Ford, and Chrysler was and for the most part still is their propensity to try to bash suppliers into submission on pricing. Forget partnering with suppliers, the primary tactic was to threaten in order to obtain the lowest short-term price. This inevitably led to a reduction in quality and overall supplier performance. In contrast there was Toyota which had a reputation of working with suppliers to obtain mutual benefit.
"Had" is perhaps the operative word. For it seems even Toyota is succumbing to competitive pressure and is changing… and not for the good. From SupplierBusiness:
Toyota to suppliers – reduce prices or face being replaced. Toyota’s stark message to its supply base is a sign that relations between suppliers and OEMs are becoming increasingly strained. In a sign of the increasingly adversarial relationships currently being seen between OEMs and suppliers, Toyota is reportedly now telling parts suppliers in Japan to drastically reduce prices or face being replaced by overseas rivals.
The conditions reportedly came at an August meeting in Nagoya between Toyota and members of its 219 strong ‘Kyoho-kai’ of domestic suppliers, a group that includes Denso and Aisin Seiki.
Times they are a'changing. Unfortunately. Toyota's rapid growth led to a leadership that is not fully steeped in the Toyota culture. This is what created the missteps during the recent quality crisis – a focus on shifting blame and fighting evidence which harmed their reputation. Many of us had thought they had learned a lesson and had gone back to their roots to focus once more on creating value for the customer and quality. Perhaps not.
Toyota has close ties with its Japanese suppliers and has traditionally been loath to threaten them with such action. The company shares cost savings with suppliers, guarantees business and holds stakes in the biggest members of its parts-makers group. The rapid expansion of its supply base overseas is seen as being partly responsible for the quality issues that have affected the company’s reputation in recent years.
Toyota has also suggested that Japan-based suppliers should procure more of their parts from overseas as one way to reduce their prices, according to reports from the discussions. The company has asked some parts-makers to cut prices by as much as half, according to one report.
Bashing suppliers on pricing and encourage outsourcing and chasing low cost labor. Watch out, Toyota. Remember your core values and principles.