US market conditions require new OEM-supplier business model

The relationships between various stakeholders across US automotive have been destabilised by recent events, most notably the rise of electric vehicles (EVs) and strike action. Increasingly, suppliers in particular are feeling the strain: on 16 May 2024, Reuters reported a memo from Ford to its EV suppliers stating “everything was on the table” in its pursuit to cut costs. The automaker’s own EBIT reports indicate US$4.7bn in losses for its Model e division in 2023 alone—around US$40,500 per EV sold.

Four days after the Reuters article, management consultancy Plante Moran released its 24th annual North American Automotive OEM-supplier Working Relations Index (WRI). The WRI measures and scores individual US automakers’ capacity and capability to handle supply chain disruptions and risk. These include attributes such as managing unanticipated cost inflation and sunk costs created by product plan changes and market volatility.

“Higher and increasing WRI results indicate a better ability to work fairly and equitably with suppliers to share the costs and risks created by a more volatile business environment,” Dave Andrea, Principal at Plante Moran, tells Automotive World. So, what do the results indicate about OEMs’ respective electrification strategies and their impact on supplier relations?