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  • Aug 2nd, 2004
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US auto parts makers are shifting their loyalties to Japanese auto-makers and away from the domestic Big Three as relationships with Detroit steadily deteriorate, according to a new study.

The shift could have dire implications for the domestics and their ability to compete as suppliers devote more resources in research and development, technological advances and quality innovations to the Japanese auto-makers, according to the study by Planning Perspectives, a Birmingham, Michigan-based consulting firm.

US auto-makers in recent years have grown reliant on profit-eroding consumer incentives to sell cars and slow market share losses to the Japanese. They have also come to expect price cuts from suppliers to help offset the shortfall.

Now, parts makers are increasingly getting squeezed as the cost of steel and other raw materials have skyrocketed.

"US auto-makers continue hammering their suppliers for price reductions and multimillion-dollar cash give-backs, and suppliers are responding by giving them less support," the study found.

Parts makers participating in the annual survey said they prefer to do business with Toyota Motor Corp and Honda Motor Co because in those relationships they are treated as partners rather than adversaries and stand a better chance of making an acceptable financial return.

Suppliers' trust of General Motors Corp and Ford Motor Co has never been lower, while trust in the Japanese carmakers has never been higher, the study found.

"In all the other industries we've studied, such as aerospace, electronics and computers, no one treats their suppliers as poorly as the US auto-makers do," John Henke, author of the annual study, said.

More than 220 suppliers participated in the survey, comparing their relationships with Toyota, Honda, Nissan Motor Co, General Motors, Ford and DaimlerChrysler AG.

Copyright Reuters, 2004


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