[Transcript]

[00:00:00] Jan Griffiths: This is the Auto Supply Chain Prophets podcast, and we are on a mission to bring you the latest insights and thought leaders leading the charge on supply chain transformation in our beloved automotive industry. This podcast is powered by QAD and AIAG. I'm Jan Griffiths, your host and producer. Let's meet your co-hosts.

[00:00:27] Jim Liegghio: I'm Jim Liegghio from AIAG.

[00:00:29] Terry Onica: I'm Terry Onica from QAD. Let's dive in.

[00:00:36] Jan Griffiths: Hello, and welcome to another episode of the Auto Supply Chain Prophets Podcast. Let's check in with my co-hosts, Terry Onica and Jim Liegghio. Terry, what have you been up to?

[00:00:45] Terry Onica: Well, I'm pretty excited working on ebook with Cathy Fisher, who's been no stranger to this program, Brian Brooks, who's a colleague of mine at QAD, and we're gonna talk about the need to reinvent quality.

And Jan, we've talked about that a lot in this show. We can't keep running the same way as we've ran for a hundred years in the times of disruption that we're having right now. So, we really wanna make sure we're talking about what are these disruptions, all the technology coming at us, and how can we thrive with better quality going forward. Taking into consideration all of this. So, I'm super excited to be starting this ebook and we hope to have it at the end of the summer, and I'm sure we'll be having a podcast to talk about what we came up with.

[00:01:27] Jan Griffiths: I like that. I like that. Jim, what have you been up to?

[00:01:30] Jim Liegghio: Well, I attended our Forced Labor Due Diligence event downtown just a week or so ago, and actually it was very eye-opening, very enlightening. We always talk on this show about supply chain visibility and knowing your supply chain and what risks might be out there—and I just thought it was fascinating.

We had a great crowd. We had a lot of OEM participation. Tanya Bolden and her team did a great job with the Forced Labor Due Diligence Conference. Next up is our supply chain event on June 17th. Again, downtown, different venue. That's a hybrid event coming up—great, fantastic agenda. So, we're really looking forward to that. Terry, I think you're moderating a panel actually, so...

[00:02:04] Terry Onica: I am, on supply chain relationships. Absolutely.

[00:02:07] Jim Liegghio: So, we're officially kicked off, I'll say, on our spring event season. Of course, fall is a big event season at AIAG as well. But yeah, supply chain's hitting it hard right now. Forced Labor Due Diligence, we have a brand new program out there encouraging people to take a look at that, and start now before it's too late, right? Understand your supply chain and what's out there.

[00:02:23] Jan Griffiths: We're all gonna be there live on June 17th, aren't we?

[00:02:26] Jim Liegghio: That's that's right. Yes. Yes, we are.

[00:02:28] Jan Griffiths: We are podcasting live. I love doing those live events.

[00:02:32] Terry Onica: It is fun. Yeah.

[00:02:33] Jan Griffiths: Well, I'll tell you, I have been all over this latest announcement with Stellantis with a new CEO. And I was a bit concerned because I saw some news come through the media that some of the investors, particularly in Europe, thought that Stellantis should have gone to the outside. And I thought, you know, "No, no, no."

Because think about it. Think about how complex Stellantis is, right? They've got brand—each brand has its own culture and way of doing things. Each country is different, the way that it operates. And then you've got functional differences. There's a tremendous amount of complexity.

Now, the Stellantis board made the decision to put Antonio Filosa in the CEO role. He's been with the company since 1999. He started at Fiat. He's Italian born. He understands how the company operates. He started in Italy and then he worked his way into a senior leadership role in South America. Then he was the CEO of the Jeep brand. He has the ability to come in and move really fast. Why? Because he has the relationships in place and he understands the culture. And so often people underestimate the power of having good, strong relationships. When you're in times of trouble, you can really lean into those well established connections, built on trust and credibility, and you can move forward.

And that's why today I am thrilled that we are going to talk about the Plante Moran Working Relations Index, which is all about measuring those relationships. And I'm thrilled to bring on the show, Dr. Angela Johnson, partner and now the new owner of the WRI survey. Angela, welcome to the show.

[00:04:23] Angela Johnson: Thank you so much. It's great to be here.

[00:04:25] Jan Griffiths: Angela, what exactly is the WRI and why should companies care about it?

[00:04:32] Angela Johnson: The WRI is called the Working Relations Index. It is a unique study of OEM supplier relationships. I have found nothing else quite like it in any industry that is truly focused on measuring the opinions and the health and the perceptions of the key supply base to the six dominant automotive OEMs in North America.

What people might not realize about the WRI is number one, it was started in 2001. So, this is the time of the year we're celebrating our 25th year of the survey. That is 25 years of data and 25 years of research, that we continue to build on what makes good relationships and what makes bad relationships.

The other thing that people might not realize about the WRI, it's not just automotive. It was based on research across 18 different industries. And automotive, somehow, centered and came to fruition as the leading industry for this type of work, this type of study.

I think we're heading into a point where other industries are recognizing there's something to these industrial relationships and maybe there's something we can learn and start to do things differently. So, one of a kind measure, what do your suppliers think about their key customers? Where's the place they're gonna go to take their first to market innovation? Who do they wanna partner with? And frankly, how well do those relationship help both OEMs and suppliers lower their cost? It's all about the bottom line.

[00:06:26] Terry Onica: I love this survey. I'm always anxiously waiting for it every year just to see how things shape up. Did some OEMs go up? Did they go down? Did they stay the same? So, what were some of the key lessons that we learned this year? What is it that suppliers like in a good OEM relationship?

[00:06:43] Angela Johnson: I think this year was really unique because you saw this widening of the gap. You know, for the last few years we've had Toyota, Honda, GM as one, two, and three. Their gap has changed a little bit here and there, but their order has stayed the same. And then, we've always had Nissan—always, in the last handful of years—Nissan, Ford, and Stellantis toward the bottom.

Well, this year what you saw was a distinct widening of the gap. The top three, Toyota, Honda, and GM improved. The bottom three, Nissan, Ford, and Stellantis got worse.

This is the widest gap that we've had since 2007, which makes everybody step back and go, "Whoa, what happened? Why? What was it that set three apart to get better and three apart to get worse?"

[00:07:44] Terry Onica: So, Angela, what were those things or characteristics? I don't know what you wanna call them, but the things that really make suppliers like or enjoy working with Honda, Toyota, and General Motors.

[00:08:00] Angela Johnson: You know what Toyota, Honda, and GM were able to do is to lean into relationships that are already established. Now is the time to say we've done the hard work and we can take advantage of relationships that are established to better collaborate together and get more win-win outcomes.

They did that in three specific ways: They worked better in how the suppliers perceive their cost and risk sharing, so they perceive that through equity, fairness, and accountability. And the top three were a third better than the bottom three.

Strategic alignment. So with all the uncertainty with, we don't know who the CEO's going to be, we're not sure what the market strategy's going to be, where are they even going to be next year? Uncertainty is really big. Where does the supplier fit into their future plan? How does this supplier's future technology fit into those plans?

And then finally we see what I call enabling behaviors. They're really the basic business behaviors that help suppliers navigate the complexity of the OEMs, its communication, its responsiveness, returning emails, availability, and simply knowledge.

Do they know what they're buying? And do they know what their own company's processes are? All of those things were about a third better, and together that led to a 50% better perception of trust.

[00:09:34] Terry Onica: I was at the event where you rolled out the WRI and what happened, along with all the OEMs. And the other thing that you mentioned was the OEMs that scored high have really unsiloed in the organizations, right? They are working together—purchasing, engineering, quality—all of that across the board. Did I understand that correctly?

[00:09:57] Angela Johnson: I think you did. What I saw, honestly, I was a little bit surprised, so this is my first year at looking at all of the data in depth, and very revealing to me.

I saw that everybody has issues with that kind of alignment, and it came down to, it's either engineering, purchasing, finance, manufacturing, that cross-functional alignment where they had issues and or where they have multi-regional operations.

So alignment between Japan headquarters and Plano, Texas for Toyota, let's say. Or even between Plano, Texas and Ann Arbor, all of the companies had different issues with, does the right hand know what the left hand is doing? Very interesting to watch it play out and where things came to an advantage. What do you think, Jim?

[00:10:58] Jim Liegghio: My mind goes back to the climate we're in, Angela. You know, obviously, that silo question is great, right? I think every organization has that challenge and to different degrees, right? We've talk about that a lot on the show, how there's different silos within these giant organizations, right? There's always work to be done there, let's say.

My mind goes back to the climate we're in and what did the lowering tide expose? Let me ask it that way, right? We're in this kind of crazy, wild, uncertain time—not that automotive's never not crazy, right? Automotive's always got something going on. But let's just take the climate that were in the past four months. You got tariffs, you got a lot of uncertainty, policy changes.

[00:11:34] Angela Johnson: Yeah.

[00:11:34] Jim Liegghio: Did that expose different weaknesses? How would you phrase that?

[00:11:37] Angela Johnson: It does. It does. So, what's really interesting is you can talk about these relationships in John F. Kennedy's quote about, "Rising tide lifts all boats." So, when the economy's good, when the industry is strong, we're willing to look past the fact that you might not have done something that I wanted you to do, or perhaps I didn't get the savings that I wanted.

We'll overlook more minor transgressions, 'cause we're still all winning. It's profitable. But when that tide rolls back, we see two things. We see everybody becomes hyper-focused on their own cost. You know, the OEMs do, and then the suppliers do as well because they've gotta report to their shareholders.

The other thing we see, and history has shown this over and over again, that when the tide recedes, people go back to their embedded behaviors. And those embedded behaviors in the auto industry are well known for the American automakers.

[00:12:43] Terry Onica: What I always find fascinating in the automotive industry is the OEMs really, I think, set the culture for the industry. So what they do to me as a Tier One supplier, I'm typically gonna pick either a section of what I like or pick my favorite. Oh yeah, I remember doing that when I worked at Johnson Controls and do that with my suppliers.

So what can we learn as we go down the supply chain? So, two questions I have for you: one, are you considering doing a WRI between the Tier Ones and the Tier Twos? And how should we behave lower in the supply chain based on what we see the OEMs doing? To drive that good culture in the industry. To really drive what we need to in the industry, especially at a time where we really need to pivot hard and have a new way of leading the industry.

[00:13:36] Angela Johnson: I think people underestimate the influence culture. Or maybe we don't talk about it enough or we talk about it at too high of a level that, yeah, we get culture plays a role, but what does that really mean? This year, you could see that play out with those three OEMs that dropped, right?

When I mentioned, if you go back to embedded behaviors, that those embedded behaviors are more aligned to old school methods. Pounding the fist on the table, threatening to take away new business if they don't get certain price concessions. If it's that transactional hard or threatening environment, then those relationships are never even gonna take off, right? So the culture plays a huge role.

[00:14:28] Jan Griffiths: That's a very important point. And I just had a flashback to a time in my life, and this has happened more than once. Leading a global supply chain organization, and as the Tier One supply chain leader, you wanna do the right thing for your supply base. But then you got five OEMs that the business is dealing with, and maybe one of them is acting like a complete idiot, right?

And then, you're in that room, you are in that executive leadership team meeting and somebody says, "Well, this OEM does this, so we should do that to our suppliers." You're sitting there and you're like, "Well, I don't really wanna do that. But I guess if that's the way it is, that's the way it is." So, these OEMs have a tremendous impact on not only how the Tier Ones behave themselves, but how they pass that down the supply chain.

[00:15:17] Angela Johnson: They do. They have a huge impact. One of the coolest things I have found in the research that I have done in this field, it's a concept I'll call "first face out of the womb," and I haven't picked it apart enough to know how well it translates across industries, but what I found was the first meaningful boss that people had in their career—it might even be when you were 18 and you worked at McDonald's. It might not be until you were, you know, three years outta college. But that first meaningful boss has more impact on the rest of your career than those who come after.

So, people who came in, for example, in GM, people who came in under Lopez we're trained a certain way. That was their first face out of the womb. They inherit that culture and you could see it evident, 'cause these people are now 30 years in the business. They're ready to retire. Guess what? They retain those values and that's how they deal with their customers. And the more incredulous part is, they become somebody else's first face out of the womb. So they're passing it along.

It's the same exact thing like you mentioned, Jan. It can go from OEM to supplier, but it's self perpetuating. And I think that demonstrates why it's so hard for GM, Stellantis, and Ford to move out of that culture.

[00:16:54] Jim Liegghio: Let's hammer in on GM for a minute, 'cause I noticed an 11 point gain—I kind of knew, I figured they would break 300. I was so excited to see them hit 310. So, they're on a steady trend line upward, right? Several years of gains. And they're doing the right things. What are they doing right, Angela? What's going on over at GM? Because I was impressed.

[00:17:12] Angela Johnson: Yeah, I was too. And back to that whole embedded behavior thing, what I noticed about GM is, if they truly were the old GM, the one that was at the bottom of the survey with the lowest score ever, I think it was 114 in 2005. If they were that GM, it would tell you they would've gone down this year. They didn't. Their score went up. So that tells you the behaviors that they've been adopting, particularly since Steve Kiefer came in, are starting to be embedded.

To me, it's the beginning of a real culture change. Steve Kiefer did a great job coming in from the supply base. He brought in an increased focus on communication and increased focus on transparency. GM has a very good model to measure these relationships, the relationship itself, and they've continued that focus through Shilpan Amin and now Jeff Morrison. And they just continue to hammer in on those behaviors and trying to root out the old school behaviors that still stay in there.

[00:18:26] Terry Onica: Angela, what I found fascinating is those OEMs that really pay attention and use the WRI almost as a metric to their own organization, score high. Look at Toyota. Look at General Motors, I've been in meeting where General Motors are like, "We have to have good relationships with our supplier." I hear their employees talking about it. So I find that very fascinating, too. That's a direct correlation that I see with those two OEMs.

[00:18:52] Angela Johnson: I think it's really a factor, and I've seen that in the conversations that I've had just in the last couple of weeks with both the supply base and the OEMs. The ones who truly take it to heart and who are using it to set, not only their priorities and what they're gonna work on but set what they measure their team on, are making a huge difference.

And you wanna know where I'm most impressed this year, and I'm hoping it turns out in their score next year, is the engagement I've had from the Ford team. From Liz Door and her executive team, true engagement to say, "We wanna understand this better. We wanna know what they're saying. We wanna know what to go work on. We wanna know what's most important." I found that to be the most telling predictor that they're gonna work to turn their scores around.

[00:19:50] Jan Griffiths: With Ford, Angela, they received quite a bit of feedback about their processes in systems and outsourcing business processes to other countries. And I think that there's a valuable lesson here. When companies need to outsource a process or bring in a new technology, it is so important to bring in all the right stakeholders and get some feedback and run some pilots before you go out there and do it. Otherwise, you end up in a situation that you see Ford in right now. That really hurt them, didn't it?

[00:20:27] Angela Johnson: It did. And I'm sure all of us have lived those experiences on implementing, and it really comes down to, "Are you thinking all of the trade-offs through before you do it?"

I believe what they're experiencing now is the impact of unconscious trade-offs. I think they moved some of their purchasing work to India for a very logical reason. It made sense. Free up some time for the buyers that are close to the suppliers to actually work on the hardcore purchasing strategy.

But then they move some of the buying responsibility to India as well, and not that that's a bad strategy. I don't wanna come out and say, "Oh, you shouldn't do that." For them, it had so many trade-offs in the execution that suppliers really struggle with those enabling behaviors I talked about. They can't figure out, if they got a problem, who do they call? And then if they call them, do they even know what they're talking about? And there's natural language barriers that get into the way. So, they're starting to see the fallout of this very inefficient process that they put in place with all good intentions to make operations more efficient.

[00:21:48] Jim Liegghio: Angela, I wanna go back to two themes that I've detected through our conversation. There are two very distinct themes that have popped into my head: communication and authentic leadership, or the Gospel of Jan Griffiths.

[00:22:00] Angela Johnson: I love that book. That was a great book and everybody should go read it. I'll put the plug in there.

[00:22:06] Jim Liegghio: A hundred percent agree with you on that. Those two themes, can you discuss how critical those themes are to success with something like the WRI and these relationships in general? Can you pick one or both and just talk into those themes?

[00:22:19] Angela Johnson: I think relationships in general to the success of the suppliers and to the success of the OEM. So, let's get down to the nuts and bolts. People should care about relationships because they impact their bottom line, right? If you have a good relationship with your supply base, it's just naturally going to be more transactionally efficient. What's it gonna do? It's gonna lower your operating cost. You lower your operating cost, it's going to increase your EBIT margin. Very much on the bottom line.

From the supplier side, it will do the same thing. They'll be able to operate with more stability, they'll be able to better plan their finances and their operations, but they can only do that if they talk to each other.

And it's amazing to me how difficult of a concept it seems to be for some people to grasp. Suppliers don't want to know what your plan is so that they can go shout it to the newspapers. They need to know what your future plan is because they need to plan their business too. That's part of it. What's going on?

Communication on a daily basis helps them when things don't go to plan. Oh, by the way, we told you we were gonna need a hundred this week. We need 500. Okay? The faster you can communicate that, the better chance you have that I don't shut down your line. So, communication is a fundamental core for both parties being efficient in managing their business.

[00:23:58] Jim Liegghio: So, Angela, you're saying direct bottom line impacts, right? Communication, right? Reflected in schedule stability, which is a gold mine, right? For a supplier. Schedule stability. Any other financial correlations or impacts you can associate to WRI?

[00:24:13] Angela Johnson: You guys can read the board behind me, I think. You know, that's a really important thing for me in general as I'm coming into this job. Because if I can't make this survey relevant to the OEM's bottom line, and I can't make it relevant to the supplier's bottom line, how am I going to keep people interested for the next 25 years? You have to get down to dollars and cents. We are for-profit businesses in this industry. And John Hankey did wonderful work on this years ago. He dusted some of that off, you know, super in the detail, trying to understand all these academic equations and stuff like that and backed up and said, "What if we just started looking at correlations? What if we just start looking to see what we might include in a cost model?"

And I found some of the output so interesting. Toyota was the only one where you see a year—same year. Let me back that up. Toyota was the only one where you see a same year correlation and it was quite strong. So tell me if this makes some sense to you, if I'm talking based on your industry experience.

The WRI is executed February to April at any given year. So 2025, their score comes out, they're on top, they went up. History will tell us then that their financial performance for 2025 will also be strong. They have a strong, positive correlation between the relationship score in a given year and their year end results. To me, that says they have to be leveraging the relationship to get the results they want. What do you guys think?

[00:26:16] Terry Onica: I think it's fascinating. I think it makes sense. It's just a great tidbit out of that survey about what organizations, if they really do focus on their suppliers and how they deal with them, how they collaborate, that there is a real good significant impact to that. And I'm glad that your survey's showing that.

[00:26:35] Angela Johnson: We're trying to get there. We're trying to look at like earnings per share, EBIT margin, net profit margin, those kind of things.

[00:26:42] Jim Liegghio: Angela, I'm dying to know this, the calculus in my head. There's all these different variables that go into this study, right? There's a ton of different variables.

[00:26:49] Angela Johnson: So many.

[00:26:49] Jim Liegghio: It's crazy. Something seems to pop into my head about strategic relationships kinda winning out above everything else. How much weight do these strategic relationships have at the end of the day? In the mix with schedule stability and product complexity and all kinds of other variables, is strategic relationships the ultimate gravity in this equation?

[00:27:10] Angela Johnson: That's a very loaded question, and I'm gonna hold off a definitive answer until I can come back with a definitive answer, but I'll give you this example because my opinion is that they weigh heavily. And the data that I'll use to support that is, let's look at General Motors.

General Motors had some of the worst of the worst feedback. They struggle and it's very evident in their quantitative results and what the suppliers were saying and the comments that they left. That late engineering changes—excessive engineering changes—complexity, volume fluctuation, forecast accuracy, and schedule stability. They struggle with that as much as any other OEM. They were right there with Stellantis. So they're getting the worst of the worst feedback, but they're also getting the best of the best feedback.

They get exceptional feedback on transparent communication, and they score the highest for suppliers who said, "We wanna put our best people on this account and we're willing to go above and beyond to help the OEM succeed." General Motors did. So, they are able to work beyond the impacts of volume, schede stability—these transactional inefficiencies. And the way they're doing that is looking at the relationship.

Not to say if they wanna keep improving, they're going to have to go after some of those very transactional things. But to me it says the relationship is weighing out. It's helping the supplier navigate some of the issues from OEM decisions. What do you guys think? Did that ring true to what you guys have experienced?

[00:29:18] Terry Onica: I would say that is very fascinating, that they could be very frustrated, yet at the same time, be very willing and happy to work with them. And maybe it's in communication somehow? Maybe they're inviting them to into the table to listen to what they have to say. Maybe they see GM improving each year in the WRI survey. So they see maybe progression and so they know that they have faith that they will tackle those problems. Do you think that might be what it is?

[00:29:49] Jim Liegghio: I kind of agree with Terry, right? I couldn't have said it any better. I think Terry just kind of hit it on the head, right? They're willing to listen. They're willing to work together to try to solve some of those challenges that everybody faces. I mean, nobody's gonna be a hundred percent innocent or perfect on those factors.

[00:30:03] Angela Johnson: Yeah. What I've seen too is, people will score relationship better if maybe the results aren't as good. They're struggling with X, Y, Z, it could be the production schedule stability, it could be supplier performance, but transactionally, they're in trouble. But if they perceive their peer and the peers company to be working really hard to address the issue—if they perceive them to be proactive—that's a huge one, being proactive. They'll score them much better than somebody who's delivering the KPIs, but not the behaviors.

[00:30:44] Jan Griffiths: It comes down to leadership and culture. An OEM is a company. It's an entity. It is made up of people. A Tier One is the same way. It is made up of people, and it is how those people interact with each other, treat each other. Do they treat each other with respect? Then they build trust and they can operate at speed. If they don't have that, it doesn't happen.

And when you're looking at an OEM, it's massive, multiple, many different facets, and so some of those relationships are gonna be good and some are not so good. So, that's why we've seen this data come in the way that it is.

[00:31:20] Angela Johnson: One of the things that I always tell people is if a relationship's not working, you're not getting the results that you think. Look at the peers up the whole ladder. Because it's that relationship from the very top, all the way down, every single rung of the ladder to the very bottom getting along.

Look at how well the peers are getting along. Because if Jim and I have a really bad relationship, but Jan and Terry, you're our leaders above us, and you have a great relationship, you can overcome that.

But conversely, if Jim and I have a great relationship and you guys don't get along, it's gonna limit the effectiveness that I can have. As easy as changing the people in the relationship.

[00:32:07] Jan Griffiths: Absolutely. And the survey shows that.

[00:32:10] Angela Johnson: You can change the whole dynamic.

[00:32:12] Jan Griffiths: Angela, closing question for you. What advice would you have to supply chain procurement leaders out there in the automotive space, whether it's an OEM level, a Tier One, or a Tier Two? Where should they start?

When they're thinking about it, they're absorbing this information, they're looking at the WRI, they're realizing the value of relationships. Where do they start?

[00:32:37] Angela Johnson: Where do they start? Great question. At the level, I think it's starting with the survey. So I would love to see—and I'm gonna throw it out there—let's get the other OEMs in the survey. Allow the suppliers to be able to see how their experiences relate up to their competition or to suppliers for different commodities underneath that same OEM.

So if I'm an OEM, I'm gonna be looking at my results. We bust these results down to infinite detail to come away with some very actionable items that they can go do to improve their relationship.

Now, if I'm a supplier, it becomes a little bit different. Some of these Tier One suppliers, they're as big as the OEMs. They've got the capability to put in place sophisticated systems to measure the relationships. If they're not, if they're only measuring the KPIs—start by measuring the relationship.

You need need to know what it is that you want to get out of the relationship, and then define the measurable goals for all of your team members that interface with the OEMs.

The other thing, if you're a small supplier, a lot of the smaller suppliers don't have the resources to manage their supply base with a lot of rigor, or they don't have the knowledge to manage their supply base with a lot of rigor.

That's where this survey, the learnings, the experience that we have in the field, can help them to set up a way to monitor both KPIs and behaviors—making sure that they're doing the things that they see are important for their relationship to the OEM. So guess what? If communication came out and it's the number one thing driving your perception of your relationship with your OEM, how's your communication to your supplier? And then, how does that trickle downstream? The fundamentals stayed the same at.

[00:34:47] Jan Griffiths: There it is. Perfect way to end today. Angela, thank you so much for joining us today.

[00:34:52] Angela Johnson: Thank you so much. It was fun to be here.

[00:34:54] Jan Griffiths: We love to hear from our listeners, reach out to any one of us, our contact information is in the show notes. And if you want to dive deeper into our content, check out our website at autosupplychainprophets.com.