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Ford ekes out cost savings in Europe

Reuters / December 04, 2002

COLOGNE, Germany -- Reducing the number of broken toes caused by collisions between workers and fork lift trucks on the factory floor may not seem a conventional way of cutting costs but Ford Europe is stopping at nothing to raise efficiency.

The European unit of the world's second biggest carmaker, Ford Motor Co, has removed fork lift trucks from the assembly lines at its revamped Cologne plant where it builds the small new Fiesta as it tries to cut injury time. Absenteeism is down 20 percent so far this year from a year ago.

It is one of many areas Ford Europe is focusing on in its overhaul which started in 2000 and includes cost cuts, a shift to a flexible manufacturing system and new product launches.

The company is past the break even point and is now targeting "solid profitability" with a medium-term aim of a three percent return on sales. The five-year plan is serving as a model for Ford's North American turnaround effort.

But with most of the big moves now behind it -- Ford Europe has cut its number of plants to six from 11 and slashed its workforce to 67,000 from 97,000 -- the group is trying to keep up the momentum by painstakingly combing through its business, seeking, seeking savings throughout the system.

So far it has obtained net cost reductions of $1.2 billion.

"We have improved the business but I am not satisfied yet," said Martin Leach, Ford Europe President and chief operating officer.


Paul Stokes, head of purchasing at Ford Europe, says the group has found savings of zero to 53 percent on individual materials and parts but declines to give an absolute figure.

It now buys 1,800 parts from 140 suppliers compared with 3,500 parts from 340 suppliers two years ago.

In scouring the company for savings, Ford has made some startling discoveries. It found it was buying 18 different blue oval Ford badges for its vehicles when three was sufficient.

"If we've got 18 in Europe, you wonder how many there are in North America," said Stokes, noting the potential for savings from such ostensibly small steps was considerable.

The new flexible manufacturing system at the Cologne plant in north Germany, which bears many of the hallmarks of innovations introduced by Japanese car companies in the last decade, helps to reduce lead times and launch losses on model changes and has led to higher capacity utilization.

Ford Europe's capacity utilitization is at 93 percent, up from 71 percent in 2000 and should rise to 100 percent in 2003.

After a $530 million investment, Cologne now has an annual capacity of 405,000 units, up 45 percent from its earlier level.

The company has altered the assembly lines to boost flexibility in model mix, product and volume and is working on linking Ford Europe's plants more closely together.

With 4,000 workers and three shifts, it now takes about 16 hours to build a car, down from about 19 before the changeover to the new Fiesta at the start of the year.

Although there is still plenty to do in Europe as soft demand combined with intense product and price competition requires yet more efficiency, Ford management in Dearborn in the United States has signalled it will look to the European example.

Ford is heading into a tough centenary year as it implements a multi-year turnaround effort after last year's group-wide loss of $5.45 billion. The company aims to make money in its automotive operations this year.

"There is a lot of scope for transporting the methods we use here to the United States," said John Fleming, head of production at Ford Europe.

My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....
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