Plus: Durable Goods Orders Fall in April and a “Road Forward” for Toyota.

Durable Goods Orders Fall in April
New orders for U.S. manufactured durable goods fell more than expected in April, to total $189.9 billion, recording their largest decline in six months as aircraft and motor vehicle orders tumbled, the U.S. Department of Commerce reported last week. The 3.6 percent decrease in total new orders followed a 4.4 percent surge in March that was larger than previously estimated.

Economists polled by Reuters had expected orders to decline 2.2 percent last month, while the median forecast of those surveyed by Bloomberg News projected a 2.5 percent April decline.

Transportation equipment, down two of the last three months, fell 9.5 percent in April. Orders for commercial aircraft plunged 30 percent from March and defense aircraft orders fell 8.9 percent. While bookings at companies like Boeing Co. declined and automakers scrambled to repair their supply chains, “rising overseas sales at manufacturers such as Deere & Co. and General Electric Co. indicate the industry will keep driving the U.S. expansion,” Bloomberg explains.

Excluding the often-volatile transportation sector, new orders were down 1.5 percent from March. Excluding defense, they were 3.6 percent lower.

“Key supply chain sectors including primary metals, fabricated metals and machinery all experienced contractions in demand,” Cliff Waldman, an economist for the Manufacturers Alliance/MAPI, said in an analysis of the durable goods report. “Of importance for the broad economy, new orders for non-defense capital goods expenditures excluding aircraft, a proxy for business equipment spending, declined by 2.6.

“Year-to-date comparisons for these key components of durable goods demand do remain distinctly positive,” Waldman continued. “But the April durable goods report, along with evidence of a U.S. economy whose growth remains soft, as well as clear signs of slowing in key regions of the global economy, suggest that the pace of manufacturing output growth has peaked and will moderate amidst uncertainty in the U.S. and world macroeconomic environments.”

U.S. Automakers Improve Relations with Suppliers
As a group, U.S. automakers continue to show steady improvement in their working relations with suppliers, while Asian automakers are slipping, according to the 11th annual OEM-Supplier Working Relations Index, produced by consulting firm Planning Perspectives Inc.

Since 2008, Ford Motor Co., General Motors Co. and Chrysler LLC have each reduced the number of suppliers ranking them as having “very poor — poor” working relations, while increasing the number saying they have “good — very good” working relations. It’s roughly the opposite for Toyota Motor Corp. and Honda Motor Co., with Nissan Motor Co. showing slight improvement.

“In the last several years the U.S. automakers, realizing that an adversarial approach to working with suppliers won’t work, have been working hard to work more collaboratively with their suppliers,” John W. Henke, Jr., CEO of Planning Perspectives and author of the study, said in a statement. “Given their continuing improvement over the last two to three years, it appears that they have made the internal management changes necessary to change the way their buyers are working with suppliers.”

The index aims to quantify the working relations between the six major North American OEMs and their suppliers, based on a survey of 451 suppliers and 17 “working relations” variables.

Ford continues to lead the U.S. automakers in the supplier-relations index, staying in third place overall. GM and Chrysler rank next to last and last, respectively. However, in the four working relations categories of “OEM Communication,” “OEM Help,” “Supplier Profit Opportunity” and “Relationship,” the Detroit Three have shown significant improvement since 2008, while the three major Japanese automakers have remained roughly the same.

Among the Japanese automakers, Honda, which was in first place overall for the last two years, has continued to drop and has slipped to second place behind Toyota, which appears to have bottomed out, while Nissan remains stuck in neutral in fourth place.

While the Detroit Three are showing significant gains in several areas, they still lag in overall OEM relations. Comparing the six U.S. and Japanese automakers overall, Toyota is in first place, followed by Honda, Ford, Nissan, GM and Chrysler.

A “Road Forward” for Toyota’s Internal Problems
To improve its vehicles’ safety, Toyota Motor Corp. should reform its corporate structure, pay more attention to customer complaints, cooperate better with regulators and take other actions, a special panel has concluded.

Toyota formed its seven-member North American Quality Advisory Panel in March 2010, at the height of accelerator-related recalls that engulfed the company and hammered its reputation for quality. The panel was approved by the automaker’s senior management and is led by former U.S. Transportation Secretary Rodney Slater. It is comprised of engineers, academics, corporate, safety and legal experts.

While the panel’s new 60-page report, titled A Road Forward, does not shed any new light on issues behind the massive, accelerator-related recalls in 2009 and 2010, it says the company “has a way to go to fix crisis decision-making and other shortcomings in its corporate culture that played a key role in last year’s safety debacle,” Reuters reports.

The report identifies a number of areas of deficiency within Toyota requiring improvement, including: a top-down management structure that limits local input about potential problems; resistance to outside feedback related to the design and safety of its products; and a failure to understand that safety problems are distinct from quality problems.

A Road Forward recommends that Toyota put one executive in charge of North American operations, as opposed to having separate heads in charge of “silos” including manufacturing, sales and regulatory divisions. The panel says the automaker should also work harder to listen to and analyze complaints from customers and to work more harmoniously with regulators, the panel advises.

At their heart, the panel’s recommendations focus on reforming the automaker’s famed “Toyota Way” corporate philosophy, which dictates a policy of continuous improvement. “Although acknowledging the importance of that principle in making Toyota the world’s largest automaker, the panel indicates that the Toyota Way falls short because it cannot recognize that errors can occur even when design and manufacturing processes function as planned,” the Los Angeles Times explains.

The report, issued at the halfway point of the panel’s two-year charter, “confirms our view that Toyota’s culture — one that works well in times of stability — left it uniquely vulnerable to a fast-moving crisis, such as the safety issues that enveloped the company last year,” Edmunds.com CEO Jeremy Anwyl said in a statement.