Toyota Falls From Top in Auto Supplier Survey as Honda Climbs

(Bloomberg) -- Toyota Motor Corp., the automaker that expanded its U.S. market share by more than half since 2002, was knocked from the top spot in a ranking of supplier relations in North America for the first time by Honda Motor Co.

Toyota came in second in the annual survey started in 2002 by consulting firm Planning Perspectives Inc. Among U.S. automakers, Ford Motor Co. climbed from the bottom two years ago to gain its largest lead over General Motors Corp., while Chrysler LLC ranked last for the second straight year.

The relationships matter because suppliers can help trim costs, improve performance and speed work on new models, often providing 70 percent of the content. Toyota, which has made cars in the U.S. for more than 20 years, dropped from first place after a decade of broadening its lineup to more closely match U.S. rivals’ and posting its first quarterly losses.

“Research we began in the early 1990s always showed Toyota as having the best relationship with its suppliers, but something seems to be changing,” said John Henke Jr., president of Birmingham, Michigan-based Planning Perspectives. “They’re looking a little more like U.S. automakers.”

Auto suppliers have been under pressure from tight credit and production declines in line with falling sales. Chrysler idled all of its plants while it restructures in bankruptcy and GM said it will idle 14 North American assembly plants for as much as 9 weeks.

More than 40 major suppliers filed for Chapter 11 last year, according to the Motor & Equipment Manufacturers Association. At least five have filed for bankruptcy this year, and many of the country’s largest suppliers, such as Lear Corp. and Visteon Corp., have amended or gotten waivers on loans to stay in compliance with lending terms.

Toyota’s Growth

Henke attributed Toyota City, Japan-based Toyota’s decline to a combination of less-experienced employees on its parts- purchasing team and stricter demands on suppliers from its engineers. The automaker’s U.S. auto sales fell 38 percent this year through April, while industry volumes slid 37 percent.

Toyota increased U.S. market share to 17 percent in 2008 from 10 percent in 2002, according to Autodata Corp., based in Woodcliff Lake, New Jersey. Now the world’s largest automaker, it has added models such as the FJ Cruiser sport-utility vehicle, Lexus brand hybrids, a Venza wagon and four Scion cars. It also makes full-size Tundra pickups in San Antonio.

The 72-year-old automaker’s loss was 766 billion yen, or $8.2 billion, for the three months that ended in March, capping its first annual deficit in 59 years. For the quarter, Toyota’s loss was wider than GM’s $5.98 billion and Ford’s $1.43 billion.

Gauging Trust

“Toyota’s supplier-relations approach is based upon long- standing principles and practices such as mutual trust and prosperity,” Tania Blersch, a Toyota spokeswoman, wrote in an e-mail. “These principles and practices do not change over time.”

Planning Perspectives surveyed 231 companies that supply the country’s six largest automakers on topics such as “trust” and a carmaker’s concern for supplier profit margins. The ranking is determined by Planning Perspective’s Working Relations Index measuring supplier perceptions of how automakers relate to them.

Honda, based in Tokyo, came in first even after slipping 10 points to 349 on the 500-point scale, besting Toyota, which slid to 339 from 415 two years earlier. Nissan Motor Co.’s third-place score improved to 268, followed by Ford at 232, GM at 183 and Chrysler at 162.

None ‘Good’

Toyota and Honda scored below 350, Planning Perspective’s threshold for “good to very good” relationships for the first time since 2003. The three Japanese automakers scored within the “average” range, while the U.S. automakers, with ratings of less than 250, had “very poor to poor” ratings.

“We work really hard with suppliers on communication and personal visits and transparency,” said Ed Miller, a Honda spokesman, who declined to comment specifically on the survey. “When you do that, when there is a problem you can spot it sooner and you can help each other sooner.”

Ford’s score improved the most, 22 percent from last year, 43 percent over two years.

Suppliers said Ford helped them get acceptable margins, and the partsmakers have grown more likely to share technology. The Dearborn, Michigan-based automaker has begun paying upfront for engineering and testing instead of reimbursing over the life of a program, said Tony Brown, the purchasing chief.

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