Toyota Does the Right Thing and Supports Their Suppliers

This is a bad time to be an automotive supplier. Following the pandemic, raw materials costs, labor costs and interest rates have risen. But most of the major automotive manufacturers refuse to absorb these costs and instead squeeze the suppliers. And “despite this, carmakers continue to record rising profits,” writes Foley & Lardner, a law firm that practices in the manufacturing sector. While those rising profits roll in for the carmakers, one supplier after another has gone bankrupt.

This is short-sighted, and dumb. But at least one company is doing the right thing, as revealed in a surprising press release from the German Rubber Industry Association. Association President Michael Klein starts out by detailing the distressing state of affairs: “Fair cooperation [between carmakers and suppliers] has made automobile manufacturing ‘Made in Germany’ so successful and has secured us as a society economically. That can no longer be said today.” While costs rise for suppliers, “we hardly experience any concessions in our delivery obligations to the automobile industry.

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“This makes Toyota’s current approach all the more astonishing and significant,” says Klein. While German and French carmakers in the region refuse to absorb rising costs, “Toyota is currently supporting its suppliers with billions in order to enable salary increases and thus develop and protect its own supply chain.” 

Toyota has been absorbing these “justified” price increases since 2022, Klein adds.

“Toyota is now demonstrating impressively that a partnership based on cooperation and fairness is sustainable and economical in the long term. For everyone involved. And the Japanese car manufacturer is actually living up to its own advertising slogan: Nothing is impossible!”

It’s stunning to me that the German manufacturers won’t support their own suppliers in the same manner. Some 99 percent of all German companies are Mittelstand, a/k/a SMEs, according to Germany’s Ministry for Economic Affairs; they’re the backbone of the economy, producing over half of the country’s economic output and providing 60% of the jobs.

I couldn’t find comparable information on how Toyota treats their U.S. suppliers, though the company’s North American arm does say, in a report on their awards program for suppliers, that “We treat each supplier as a partner to produce and deliver world-class vehicles” and that “each Toyota plant helps to sustain a community.” I wonder how long the rest of the big dogs think they can look the other way.

Source: core77

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