In a survey of suppliers on their working relationships with the six major U.S. auto makers – Toyota, Honda, Nissan, Ford, Chrysler and GM – GM scored the worst. But of course they did. They are GM and we can always count on such results from them. And, of course, they will continue to do so as long as accounting is the dominant force in their management thinking.
Old school accounting thinking – the sort that is a near religion at GM whose management learned their trade from the high priests of silly accounting at the temples of the Ivy League – doesn’t reflect the difference between value adding and non-value adding spending. It only knows big numbers and little numbers and it sorts them into useless categories such as fixed and variable and direct and indirect, and it scrambles the numbers into a jumbled mess of accruals and allocations until no sense can be made of them whatsoever. Direct labor and purchased parts are big numbers that detract from sales in the simple minded profit math and simple minded management thinks all it has to do is find ways to make big numbers smaller and their job is done. So they abuse direct labor and bludgeon suppliers thinking all the while that this passes for good management.
So Toyota scored highest with a ranking of 318, followed by Honda at 295, Nissan at 273, Ford at 267, Chrysler at 245, with GM trotting along behind the rest with an embarrassing 244. As the author of the article in the Detroit Free Press wrote, “Automakers that maintain positive relationships with suppliers tend to offer the best products at affordable prices.” He could have also written that they tend to be very profitable.
As easy GM failure is to predict, and as much fun as it may be to ridicule them, the real benefit to the survey is that the folks who conducted it – Planning Perspectives, Inc. – put it out there for all the world to see, and it would behoove just about every manufacturer, automotive or otherwise, to use it to do a bit of self-analysis. You can even use the handy rating scale the auto folks have provided, looking at each question and scoring yourself on a scale from GM (clueless) to Toyota (world class) with the rest in between.
The 16 areas of measurement are here on the Planning Perspectives website.
For instance, you can ask yourself about your level of concern for your suppliers’ profits when asking them for price concessions (Category #15). If your honest answer is that you are very concerned and work closely with the supplier to be sure you are not asking anything that will unduly harm them, give yourself a TOYOTA. If the honest answer, however, is that you never give the matter even a passing thought, then you should score yourself a GM.
I suspect that even a lot of companies that consider themselves to be pretty lean will find that, when it comes to their supplier relationships, they have a lot more in common with GM than they do with Toyota. If we are honest about it, most companies that think they are lean still spend all their time thinking about themselves and their immediate results, giving scant attention to how it works out for their customers, let alone how all of their lean efforts are impacting their suppliers.
Take heart, however, no matter how poorly you might fare in such a rigorous self-assessment, you will almost certainly make out better than Volkswagen which managed to do what many believe to be impossible; that is, to make GM look good. They scored a 181 on the survey, indicating outright hatred on the part of the suppliers for their German customer.