2019 Supplier Working Relations StudySociety of Automotive Analysts – Purchasing Summit – June 18, 2019

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Supplier Relations Go Beyond TransactionsBuyer attitudes, behaviors, as well as company policies and practices

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WRI: Purchasing’s Stress TestMeasuring Today’s Capabilities; Tomorrow’s Capacities

Today’s CapabilitiesIndustry Pressure Representative WRI VariablesProduction Schedule Volatility Timely CommunicationOff-Set Plateauing Revenue Total Cost Reduction AssistanceRecord Number of Launches Engineering Change Notices; Engineering AlignmentManaging Unanticipated Risks/Costs Cost Savings Sharing; Managing Sunk Costs

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Tomorrow’s CapacityIndustry Need Representative WRI VariablesTechnology Roadmap Initiation Trust to Invest in New CapacitySupply Base Consolidation Open and Honest CommunicationComplex System Integration Quality Improvement AssistanceM&A Cost Savings Synergy Concern for LT Return; Overall Relations

161 156 150114 131

174 163183

228

236 251 251

244 224

250

290 287283

167 161 163 157174 162

191232

264 271 267 271

267261 267 270

250 262

175 177186

196218

199

161 162

187

221248 250 245

224 222218

204

188

227

259

302 298 300289

253268

249247 256 256

273

244225

203

182

198

297

316

384 375 368380

359349 340

309293

287295

330323 319

313 328314334

409415

407415

367

339330

327

296 297

318

336332 328 333 336

100

200

300

400

500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

GM Ford FCA US Nissan Honda Toyota

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OEM

–Su

pplie

r Wor

king

Relat

ions

Good

-Ve

ry G

ood

Very

Poo

r -Po

orAd

equa

teOEM – Supplier Working Relations Index®

Near-Term Capabilities Diverging; Long-Term Capacities Identified

2019 Survey Demographics

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2019 2018

Number of Individuals 635 684

Companies Represented 414 496

Buying Situations 2,024 2,024

Consensus Returns 47% 50%

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WRI: Captures 23 Similar Variables in 5 Component Areas

Supplier trust of Customer

Supplier perception of working relations with Buyer

Customer open and honest communication

Customer communicates timely information

Customer communicates adequate amounts of information

Customer help to suppliers to reduce costs

Customer help to suppliers to improve quality

Customer late/excessive engineering changes (reverse measure)

Conflicting objectives across Customer functional areas (reverse measure)

Supplier given flexibility to meet cost objectives

Supplier involvement in Customer product development

Customer shares savings from cost reduction proposals

Customer covers sunk costs on cancelled or delayed programs

Customer concern for supplier profits

Supplier opportunity to make acceptable return over long-term

Customer rewards performing suppliers with new/cont’d bus.

Working Relations

Index®

CustomerCommunication

CustomerHelp

CustomerHindrance

SupplierProfit

Opportunity

Customer -Supplier

Relationship

Components Variables

Measuring Corporate and Purchasing Capacity and Capability to Deliver Benefits and Profits

8

117

145

150 17

1

145

288 30

1

296

297

302

306

403 43

6

429 44

2

430

440

100

200

300

400

500

FCA US Nissan Ford GM Honda Toyota

Very Poor - Poor Adequate Good - Very Good

GOO

D–V

ERY

GOO

DVE

RY P

OO

R–PO

OR

ADEQ

UATE

Inde

x® V

alue

Each OEM Can Deliver Top PerformanceOEMs’ Overall 2019 Results Broken into WRI™ Categories

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100

The Issue is Consistency Across the Supply BaseOEMs’ Overall 2019 Results Broken into WRI™ Categories

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66%

62%

45%

41%

20% 24

%

23%

23% 30

%

27%

38%

25%

11% 16

%

25% 32

%

41%

51%

0%

10%

20%

30%

40%

50%

60%

70%

FCA US Nissan Ford GM Honda Toyota

Very Poor - Poor Mediocre Good - Very Good

Perc

ent o

f Occ

urre

nce

WRI – FCA 2019 Performance Review

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FCA – 2019 Review and change from 2018Strongest Characteristics

After launch, leverages supplier skills and expertise 3.07 + 0.06

Flexibility to meet quality objectives 3.05 + 0.00

Overall buyer-supplierworking relationship; Effective PD engagement

3.01 - 0.07

Weakest CharacteristicsConcern supplier maintains margin given price reduction 1.52 - 0.10

Help reduce total cost of acquisition 1.71 - 0.10

Covers sunk costs when new programs are delayed 1.73 + 0.01 Note: Excludes Reverse

Scale Activities

WRI – Nissan 2019 Performance Review

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Nissan – 2019 Review and change from 2018Strongest Characteristics

Overall buyer-supplierworking relationship 3.11 + 0.07

After launch, leverages supplier skills and expertise 3.03 + 0.01

Early involvement in product development 2.99 + 0.08

Weakest CharacteristicsConcern supplier maintains margin given price reduction 1.61 + 0.10

Help reduce total cost of acquisition 1.79 + 0.04

Shares cost reduction savings 1.87 + 0.05 Note: Excludes Reverse

Scale Activities

WRI – Ford 2019 Performance Review

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Ford – 2019 Review and change from 2018Strongest Characteristics

Overall buyer-supplierworking relationship 3.55 + 0.17

Effective involvement in product development 3.40 + 0.20

Flexibility to meet quality objectives 3.30 + 0.14

Weakest CharacteristicsConcern supplier maintains margin given price reduction 1.77 - 0.03

Help reduce total cost of acquisition 1.94 - 0.03

Shares cost reduction savings 1.94 - 0.08

Statistically significant increaseNote: Excludes Reverse Scale Activities

WRI – GM Performance Review/Feedback

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GM – 2019 Review and change from 2018Strongest Characteristics

Overall buyer-supplierworking relationship 3.62 - 0.09

Effective involvement in product development 3.40 - 0.01

Flexibility to meet quality objectives 3.36 + 0.06

Weakest CharacteristicsConcern supplier maintains margin given price reduction 1.99 + 0.02

Help reduce total cost of acquisition 2.07 - 0.08

Help reduce costs 2.09 - 0.09 Note: Excludes Reverse Scale Activities

WRI – Honda 2019 Performance Review

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Honda – 2019 Review and change from 2018Strongest Characteristics

Overall buyer-supplierworking relationship 3.79 + 0.08

Open and honest communication 3.67 + 0.16

Early involvement in product development 3.62 + 0.11

Weakest CharacteristicsHelp reduce total cost of acquisition 2.16 + 0.15

Helps reduce costs 2.19 + 0.07Shares savings cost reduction savings 2.47 + 0.01 Note: Excludes Reverse

Scale Activities

WRI – Toyota 2019 Performance Review

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Toyota – 2019 Review and change from 2018Strongest Characteristics

Overall buyer-supplierworking relationship 3.74 + 0.02

Open and honest communication 3.67 + 0.02

Supplier trust of OEM 3.65 + 0.02Weakest Characteristics

Help reduce total cost of acquisition 2.22 - 0.02

Shares savings cost reduction savings 2.36 - 0.19

Helps reduce cost 2.43 - 0.02Note: Excludes Reverse Scale Activities

Reason for Price Concession – Loyalty to OEMBenefit in good times and bad

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18%

12% 15

%

14%

34%

33%

11%

6%

16%

12%

27%

35%

13%

12%

11%

20%

35%

39%

14%

10%

15%

16%

32%

31%

0%

10%

20%

30%

40%

FCA US Nissan Ford GM Honda Toyota

2016 2017 2018 2019Pe

rcen

t of O

ccur

renc

e

Reason for Price Concession – Promise of Future BusinessA future tripwire if program awards do not occur

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32%

29%

33%

28%

18%

13%

29%

24%

30% 33

%

13% 14

%

28%

25%

25%

22%

14%

12%

33%

22%

34%

26%

24%

17%

0%

10%

20%

30%

40%

FCA US Nissan Ford GM Honda Toyota

2016 2017 2018 2018

Perc

ent o

f Occ

urre

nce

Reason for Price Concession – Could not Afford to Lose BusinessAn indication suppliers are more able to walk than typically thought

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4%

2%

5% 4%

3%

5%4%

7% 8%

5% 6%

3%

6% 6%

9%

6%

3%

5%6% 4% 5% 6% 4% 4%

0%

10%

20%

30%

40%

FCA US Nissan Ford GM Honda Toyota

2016 2017 2018 2019Pe

rcen

t of O

ccur

renc

e

Preferred OEM Customer RatingsPreferred customers better positioned to capture supplier-generated benefits

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3.44

3.03

4.18

4.06

4.43

4.41

3.42

2.89

4.07 4.15 4.

43

4.39

3.39

2.97

4.15

4.08 4.

37 4.43

FCA US Nissan Ford GM Honda Toyota

2017 2018 2019Very Preferred

5.00

Preferred4.00

Somewhat Preferred

3.00

Ambivalent2.00

Supp

lier C

usto

mer

Pre

fere

nce

of O

EM

Red dot indicates statistically significant difference with previous year.Yellow dot indicates statistically significant difference with 2017.

Are Purchasing Groups Ready to Handle the Transition and Elimination of Component Bill of Material

Onboard charging moduleDC/DC Converter

Inverter

Traction motor

Battery pack

Fuel system

Air intake system

Exhaust systemEngine

Transmission

ICE powertrain components EV powertrain components

Market Shifts

• Converging disruptions (autonomy, sharing and powertrain efficiency) will increase the pace of adoption of electrification

• Powertrain components will transition to EV specific technology over time, eliminating the need for ICE products throughout the vehicle

Every Purchasing Group and Supplier is ImpactedExample: interior design requirements

• Interior focus still in the cockpit, but with more technology available

• Interior physical features highly streamlined• Interior design is used to differentiate their vehicles

in the market

2025 and Beyond“Autonomous and shared”

2020 – 2025“Personalized and connected”

2015 – 2020Current interiors

2000 – 2015Traditional interior of the past

• Interior is the “3rd living space”• Interior maximizes user enjoyment and

satisfaction through their experiences inside –air, light, touch

2008 Chevrolet Trailblazer SS 2018 Chevrolet Equinox Mercedes-Benz F 015 Luxury in Motion Concept2018 Tesla Model 3 Featuring Next Gen Design / Technology

• Cockpit focus to layout of the interior

2019 WRI® by Purchasing AreaWith all this change, no OEM has more than 1 purchasing area rated 350 or above

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PM Purchasing Area1 FCA Nissan Ford GM Honda Toyota

Body-in-White 172 242 262 271 293 292

Chassis 203 204 279 317 305 344

Electrical & Electronics 165 200 267 256 357 346

Exterior 169 204 230 288 308 372

Interior 191 137 255 279 354 328

Powertrain 200 230 264 273 335 3291 Red Cell indicates lowest Purchasing Area WRI® across OEMs;

Green Cell indicates highest Purchasing Area WRI® across OEMs.

161 156 150114 131

174 163183

228

236 251 251

244 224

250

290 287283

167 161 163 157174 162

191232

264 271 267 271

267261 267 270

250 262

175 177186

196218

199

161 162

187

221248 250 245

224 222218

204

188

227

259

302 298 300289

253268

249247 256 256

273

244225

203

182

198

297

316

384 375 368380

359349 340

309293

287295

330323 319

313 328314334

409415

407415

367

339330

327

296 297

318

336332 328 333 336

100

200

300

400

500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

GM Ford FCA US Nissan Honda Toyota

24

OEM

–Su

pplie

r Wor

king

Relat

ions

Good

-Ve

ry G

ood

Very

Poo

r -Po

orAd

equa

teOEM – Supplier Working Relations Index®

Near-Term Capabilities Diverging; Long-Term Capacities Identified

Conclusions• Each OEM has the capability to achieve strong supplier relations based on the key WRI

drivers including• Trust, • Communication, • Flexibility/Assistance, • Lack of Hindrance, and • Supplier Profit Opportunities

• The OEMs’ supplier relations are rated poor to adequate, at best• No OEM is consistently strong across all purchasing areas level, however, there are OEMs

that have strong supplier relations in specific purchasing areas• Given future technology and market disruption will impact all vehicle systems

OEMs must focus on improving all supplier relations’ factors in every purchasing area to commercialize future vehicles, technologies and business models

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Thank You

Dave Andrea Principal Strategy and Automotive | Mobility Consulting Practice

Plante Moran

248.223.3547 Dave.Andrea@plantemoran.com

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