Ford scans parts for savings; 1,000 engineers scramble to make cuts, keep quality
By MARY CONNELLY
DETROIT - The re-engineered 2003 Lincoln Town Car is arriving on dealer lots. But already, Ford Motor Co. is scrambling to change the suspension, this time to save money.
The Town Car is not alone. The company has 1,000 engineers picking through all of its vehicles. They are seeking ways to remove product features, find cheaper materials and rework components at a lower cost.
Ford is paying for its sins of the past. In the late 1990s, the company overengineered many vehicles, adding rich content it believed would delight consumers and convince them to pay higher prices, improving profit margins. To overcome staggering losses, Ford by mid-decade wants to trim an average $700 per unit in material costs from every vehicle built in North America. Every part and system on Ford's North American product line is under the microscope, whether the vehicle is a future model, on the road or newly revised.
But critics maintain that the changes risk quality problems.
"If you look just at the piece price, you can gain in the short term but end up paying in the long term when it comes to warranty,'' said John Henke Jr., president of Planning Perspectives Inc. in Birmingham, Mich.
Located in three buildings in Dearborn, Mich., Ford's "value engineering" brigade is working hand-in-hand with suppliers, the company's powertrain unit and the five vehicle-development teams overseeing Ford, Lincoln and Mercury products in North America.
"We need to establish a cost-control culture," Nick Scheele, Ford COO, told Wall Street analysts in a conference call in May. "We had a strategy previously which led to us putting costs in our vehicles."
Dave Marinaro, Ford director of value engineering, said "Our primary thrust is to look at a commodity or a subsystem and figure out how to deliver it with the same quality, durability and reliability but at a lower cost.''
Marinaro's team of 300 engineers is responsible for short-term savings to be gained in 2002 and 2003. A second group is addressing savings available by 2004 and 2005. And a third group is delving into new products and vehicle platforms being developed for the second half of the decade.
"There is no singular attack plan you can use," Marinaro said. "We look at new technology. We look at whether the part can be designed
using one piece versus two, or two rather than four. We look at using a part and applying it to a second or a third vehicle."
It is too early to tally the savings in the program, he said.
Ford risks exacerbating existing quality problems and driving up warranty costs, said Henke, president of Planning Perspectives and a marketing professor at Oakland University in Rochester, Mich.
In a preliminary study by his company released last week he said suppliers rank Ford as the worst major North American manufacturer for mandating "excessive and late engineering changes." The late changes "hurt Ford's ability to develop products on time and still meet quality targets,'' the study said.
Late changes affect more than the part or system being altered, Henke said. "You also have to look at it and say, 'What will the change do to the part with which it is associated and the system into which it is integrated?' That could be a problem.''
But Ford's Marinaro said the automaker is not risking quality.
"We understand the total vehicle implications of any design change,'' he said. "We use various analytical techniques. There is testing as required, a component test or a total vehicle test. We are very carefully looking at each one of these ideas and ensuring we are ready to put it into production; that engineering, the supplier and manufacturing have done their work.''
Suppliers are not eager to revisit the days of J. Ignacio Lopez at General Motors in the early 1990s. With a heavy hand, Lopez and his team of cost-cutting "warriors" demanded that suppliers identify cost savings and pass those savings to GM. Some suppliers hope that Ford will adopt a collaborative approach and speed decision-making and response to supplier suggestions.
"The challenge for the supply base is to drive savings ourselves,'' said David Westgate, CEO in North America for Rieter Automotive Systems, a Swiss supplier of acoustics systems. "It's not just Ford's responsibility to drive that activity. It's our responsibility, too.''
Ford has approved a design change for components Rieter Automotive supplies to the Ford Taurus and Mercury Sable.
In June, a new material will be used for the dash insulator, package trays and inside cowl, Westgate said. The change is expected to yield savings of up to 14 percent on the piece price with equivalent or superior performance, he said.
Similar material changes also are being considered for the Mercury Marquis and Ford Crown Victoria, Westgate said.
Another supplier, who did not want to be identified, suggested that Ford may find carving out costs is slow going.
"A lot of the low-hanging fruit was identified a long time ago,'' he said. "Remember, the industry has been going through a lot of these things for almost 20 years."
Marinaro said Ford is engaging in a joint effort with suppliers. "I am not pinching their pocket. We need to work with them to develop ideas and mutually bring them to market and share the benefit."
The automaker will share savings in multiple product lines.
"Because there is a central team, if one person discovers another way to do things, it can be quickly looked at and we can determine if it can be migrated,'' said Said Deep, Ford spokesman.
For example, the hinge on the glovebox door of the 2003 Ford Expedition and Lincoln Navigator now is molded into the door, replacing a steel hinge. That change to the two vehicles is expected to yield $2 million in savings annually, Deep said. The 2003 Ford Escape, Mazda Tribute, Ford Explorer and Mercury Mountaineer will incorporate the new hinge, Deep said.
Ford also wants to remove product features that the customer won't notice. For example, the 2003 Town Car is equipped with map pockets on the front of the driver and the passenger seat bottoms. Engineers are asking if the pockets are necessary.
Ford executives told Wall Street the company is wary of decontenting its vehicles and raising customer ire.
"The real artistry for us as we go through this is to get the costs out but not cheapen what the customer expects and wants,'' said Bill Ford, Ford chairman.
"We spent a lot of years paying for our sins of poor vehicles in the early 1980s, which were just stripped, four-cylinder, lousy vehicles. Remember such stellar products as the (Ford) EXP and the (Ford) Fairmonts and some of those others?'' Bill Ford said. "We are not going back to those days." c
Staff reporter Amy Wilson contributed to this report
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.....