Ford blames its suppliers for quality problems, demands improvement - Ford Forums

Stacy94PGT · 05-28-2002, 08:58

Ford blames its suppliers for quality problems, demands improvement

By ROBERT SHEREFKIN
Automotive News

DETROIT - Ford Motor Co., stung by quality problems and rising warranty costs, has demanded that its top parts makers fix the problems or risk losing the automaker's business.

Ford last month blamed suppliers for their role in its decline in vehicle quality compared with its competitors. And even as Ford vows more price cuts for suppliers, it says they must improve or lose business.

Tony Brown, Ford's global purchasing vice president, and other top executives laid out a grim picture of the automaker's declining quality at an April 16 meeting with its top 100 suppliers. In the past two years, Ford Motor has ranked behind General Motors and DaimlerChrysler in internal reports measuring satisfaction with overall vehicle quality, according to the Ford presentation, a copy of which was obtained by Automotive News.

And all three automakers rank well below Honda Motor Co. and Toyota Motor Corp.

Meanwhile, Ford's North American warranty costs rose 16 percent last year to $2.2 billion. (See chart above. )

Any role Ford's own glitches might have played in the quality scores was not disclosed in the report, nor would Ford discuss the matter.

"On the face of it, Ford suppliers would appear to bear much of the responsibility for quality issues at Ford," said consultant Craig Fitzgerald. "When you look deeper, some of those root problems are due to Ford's procurement, communications coordination and business practices."

Fitzgerald, a partner with Plante & Moran LLP of Southfield, Mich., said: "Ford has deep-seated and very significant structural problems that will take many years for them to address. There are no quick fixes to many of Ford's problems."

The Ford report cites supplier manufacturing as a major source of troubles, with the biggest problem coming from its Tier 1 suppliers.

Dave Velliky, Ford's global director of supplier technical assistance, said suppliers can help the automaker's turnaround. Velliky said he left the supplier meeting at Ford World Headquarters in Dearborn, Mich., with "a clear sense of partnership between Ford and its suppliers."

The automaker, for example, is in the process of tripling to 1,000 the number of engineers assigned to work with suppliers to come up with cost-cutting ideas.

Ford buys 87 percent of its outside parts from its 100 largest suppliers.

Its quality problems are a major contributor to the collapse of the company's financial performance. Ford Motor lost $5.45 billion last year, ousted its CEO, angered its dealers and suffered launch delays as it continued to pressure suppliers on quality and cost.

David Thursfield, 56, who becomes group vice president in charge of international operations and purchasing on Aug. 1, will be charged with slashing Ford's purchasing costs by $3 billion by 2005 - without sacrificing quality. (See story below.) Thursfield will succeed Carlos Mazzorin, 60, who becomes senior adviser to the Office of the Chairman and Chief Executive.

Brown will report to Thursfield.

Ford's top suppliers say they can help with saving costs in design and materials. But many remain skeptical of the automaker's collaborative cost-cutting approaches.

Moreover, in a November survey conducted by Arthur Andersen, almost half of the suppliers surveyed said Ford had the worst internal cost-reduction process in the North American industry.

Brown and his Ford team asserted that 76 percent of the company's quality problems stem from its Tier 1 suppliers. But problems are increasing further down the supply chain, according to Ford's analysis of its stop shipments, a measure of the effort to keep faulty vehicles from reaching customers. In Ford's latest survey, covering the seven-month period through February, its suppliers below Tier 1 contributed 24 percent of the problems. That was up from 7 percent previously.

While Ford blamed suppliers, there is plenty of blame to go around, said a supplier executive familiar with the April 16 meeting. "Ford people continue to meddle in our manufacturing process when we are in fact the experts," he said, and "this causes additional costs to suppliers."

The meeting was a regularly scheduled summit with the company and its parts makers.

Ford is imposing stiff quality goals for its suppliers this year. It is trying to eliminate "field actions" - calling back vehicles from consumers or dealers because of faulty parts.

Suppliers must reduce their faulty parts per million by 25 percent. Stop shipments also must decline by 25 percent.

Ford also plans a shake-up of the 393 plants of its suppliers around the globe that don't meet the automaker's 2002 Q1 quality standards. Seventy-nine sites, or about 20 percent, must be fixed by year end, or Ford could yank its work from those plants.

Suppliers can lose their Q1 ratings for a variety of reasons, including field actions, stop shipments or high defect levels.

For its best performing suppliers Ford promises rewards and new business. The presentation by Brown and his colleagues offered this carrot: Ford will "leave them alone and let them run their companies" and not "shadow engineer" a supplier's development process, which would just complicate the supplier's efforts.

Poor performers face Ford's fix-or-leave strategy, which could mean no future business.