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Transparency, simplicity key to supply chain, auto execs say

Young was joined by Jonathan Jennings, vice president of supply chain for Ford Motor Co.; Jeff Morrison, vice president of global purchasing and supply chain for General Motors; Ray Scott, president and CEO of Lear Corp.; and David Dauch, chairman and CEO of American Axle & Manufacturing.

The roundtable was part of the Automotive Golf Classic, an annual event hosted by Automotive News, benefitting the Boys & Girls Clubs of Southeastern Michigan. The panel discussion, which took place at Indianwood Golf & Country Club in Orion Township, was moderated by Philip Nussel, online editor at Automotive News.

The auto executives addressed the elephant in the room early. Inflationary costs have been a major pain point in the automotive industry, and passing those costs up the supply chain continues to be a challenge for suppliers and OEMs.

“I’ve been trying to meet with our customers to discuss inflationary costs,” Scott said with a laugh as he joined the purchasing chiefs joining him on stage. “I think we’re all feeling a lit bit of the pain … but I am very optimistic that working in a collaborative way is the best solution.”

One of the biggest issues facing the Southfield-based seating supplier is the scarcity of workers and cost of labor, particularly in Mexico, according to the CEO.

“That attractiveness of having a manufacturing job isn’t necessarily there anymore,” Scott said. “If you look at Mexico right now, there’s a big influx of manufacturing jobs because of what’s happening geopolitically. So there just isn’t enough employees to satisfy it… What was once a social issue as you think about automation is now a survival issue .”

Young said the microchip shortage that crimped the supply of new vehicles amid unprecedented demand showed Toyota that it needs a lead time of at least five years when it comes to semiconductors. Whereas in the past automakers would have limited interaction with microchip makers, a direct relationship has become essential.

“We’re trying to triangulate,” Young said. “So of course, our major tier one partners are working directly with the semiconductor manufacturers. We are as well. We’re trying to give a longer horizon to technologies and volume needs so there’s an appropriate planning taking place.”

In that same vein, Morrison said that simplifying the supply chain is key to keeping it resilient. Now that GM has made it through the crisis, executives must focus on strengthening supply lines.

“We have electronic components where we are, if you map it out … we’ll have 300 different partners and technologies for something that you probably could narrow down to a dozen,” he said.

Stronger communication makes a healthier supply chain, added Ford’s Jennings.

“Another key thing is improving transparency and communication,” he said. “As OEMs, we need to do a better job forecasting further out so that suppliers are able to order further out. We need to understand the entire value chain.”

Labor availability is also a major problem for American Axle, especially in the US, Dauch said. However, the more existential concern for the Detroit-based supplier of axles is transitioning to electrification successfully.

“We got into the electrification business back in 2010,” Dauch said. “The problem is the market wasn’t there …. A lot of it is going to be dependent on how much the OEMs want to do themselves in-house.”

Even for the seating business, which is more insulated from a shift to EVs than propulsion systems, electrification will have an impact, Scott said.

“The transformation that we’re going through with electric vehicles, that takes a tremendous amount of collaboration,” he said.

Emerging from the microchip crisis has provided a framework for how to prepare for problems that will inevitably arise from the shift to EVs, Young said.

“We have to make sure (through) the lessons learned in the last three years that we have the appropriate protocols and risk management systems in place to ensure this doesn’t happen again,” he said.

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