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Old 06-11-2003, 07:54   #1 (permalink)
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New system helps Ford move ahead on costs

Financial Times.com
By Jeremy Grant in Norfolk, Virginia

Ford Motor Company has achieved greater cost savings than expected from the introduction of a more efficient vehicle manufacturing system, after only six months of implementing the scheme at three of its 17 US assembly plants.


The development is a sign that Ford appears to be making rapid progress on cutting the cost of making vehicles after years in which it lagged behind its rivals due to reliance on outdated manufacturing systems.

The world's second-largest carmaker, which is 18 months into a $9bn restructuring, said six months ago that it hoped to save $1.5bn-$2bn by the end of the decade by installing "flexible manufacturing" systems at its plants to allow Ford to build up to eight different models on two vehicle platforms - that is, basic vehicle underbodies.

It said it would achieve this goal partly because the new flexible manufacturing system was expected to cost 10-15 per cent less to install and purchase than the outdated systems it will replace.

However Roman Krygier, vice-president in charge of global manufacturing and quality, said that with the system installed at three US plants, the company had saved 22 per cent.

If Ford can match that rate at the 12 plants scheduled to switch to flexible manufacturing by the end of the decade, Ford would save substantially more than its $1.5bn-$2bn target.

"I think we underestimated some of the economies of scale. This gives us a bit of a jump start on [the target]," said Mr Krygier. However Ford remains well behind General Motors and Japanese manufacturers in manufacturing flexibility. Toyota and Honda have used flexible manufacturing for more than 10 years in the US to allow them to switch from producing one vehicle model to another according to shifts in customer demand.

The disclosure came as Ford launched production of a new version of its best-selling F-150 pick-up truck which, although sold mostly in North America, is still the best-selling vehicle in the world.

Production of the new F-150 started at the company's plant in Norfolk, Virginia, the first Ford plant to operate using the new flexible manufacturing system. Two more will follow in coming months: one in Kansas city and the other in Dearborn, Michigan.

Ford is pinning much of its hopes of restoring the company to sustainable profitability on sales of the F-150, which accounts for a quarter of its total vehicle sales in North America and a substantial portion of total group revenues.

However analysts are concerned about Ford's ability to meet its annual sales target of 1m units amid signs of weakening consumer demand for vehicles and as financing incentives lose their ability to attract buyers.

There are also concerns over Ford's ability to recoup an estimated $1,000 per vehicle in extra features, compared with the old model, in such a tough pricing environment.
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