S.America:Brazil paves way for Ford;Turnaround offers vital lessons for automaker
Brazil paves way for Ford
Division's surprising turnaround offers vital lessons for automaker to recover, prosper in U.S.
Geraldo Samor / Wall Street Journal
SAO BERNARDO DO CAMPO, Brazil -- Ford Motor Co.'s Brazil unit here was straining to succeed in 1999 as much as Detroit and the U.S. auto industry are struggling today. After four consecutive years in the red, Ford had seen its market share in Brazil slip to just 6.5 percent, fourth place behind rivals like General Motors Corp. Executives at the company's Dearborn headquarters were seriously considering pulling out of South America.
Seven years later, Ford South America has become the company's biggest turnaround story, accounting for $1 of every $5 Ford earned last year. What's more, in Brazil, the biggest auto market in the region, Ford has doubled its share to 12 percent, even as rivals like Honda Motor Co. and Toyota Motor Corp. have mounted new competition.
How Ford averted its near-closure in South America underscores two important business lessons for Detroit at a time when the company is engaged in a make-or-break effort to return to profitability and recover market share in the U.S. "What we can learn from South America is a willingness to start with a clean sheet of paper," Chairman and CEO Bill Ford Jr. said in a recent interview.
The steps the company took in Brazil were basic but vital. First, Ford Brazil overhauled manufacturing by closing inefficient plants -- a move that is now being mimicked by Detroit -- and took a huge risk by opening a low-cost factory that now ranks among Ford's most efficient. Second, Ford Brazil started making cars that were in synch with consumer tastes. That is something Ford needs to do in North America, industry con******ts say.
"We made a choice for innovation," says Antonio Maciel, the former head of Ford Brazil who presided over the turnaround before recently taking the top job at a Brazilian paper manufacturer. "The U.S. can do even more than we did."
As part of the bid to reinvent itself, Ford is closing 14 North American factories and slashing up to 34,000 North American jobs during the next six years.
But Ford in the U.S. has yet to try anything as ambitious as Ford Brazil's $1.9 billion Camacari plant, built to make the Ecosport. The plant, named after the town where it is located, is a prime example of the more efficient, "flexible" plants that are at the core of Ford's Way Forward U.S. turnaround plan. As part of the plan, by 2008 Ford wants to have 80 percent of its North American manufacturing done in flexible plants, compared with some 50 percent in recent years, a Ford spokeswoman said.
In a flexible plant, auto makers can build models that sometimes don't look remotely like each other by organizing manufacturing so that the cars share the same stamping, body shop, painting and assembly lines. Besides the Ecosport, Ford Brazil uses Camacari to make the Fiesta, a family sedan and hatchback.
In traditional Ford plants, each workstation along the assembly line is supplied with various parts so that cars can be made to fit customers' specifications. But such large inventories mean high costs. In Camacari, inventory on the assembly line lasts only two hours, and it is replenished every 20 minutes by suppliers that are located nearby or sometimes inside the factory. The result: Camacari's assembly costs are one-third of the costs of other automakers in Brazil.
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.....