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Scheele urges Ford to treat suppliers better

By Robert Sherefkin
Automotive News / September 01, 2002

Ford Motor Co. President COO Nick Scheele has urged the company's 350,000 employees to treat suppliers better in the interest of the automaker's long-term success.

"If we are not our suppliers' customer of choice," Scheele said in an e-mail to company employees on on Aug. 18, "they will dedicate their best people, invest their best resources, and offer the newest technology and innovation to our competitors - - putting Ford at a competitive disadvantage." A copy of the e-mail message was obtained by Automotive News.

Scheele's appeal is the latest move by a top executive at a U.S. automaker to extend an olive branch toward its suppliers. The relationship between the Big 3 and suppliers has grown rancorous in over the past last three years as the automakers have regularly pressed for price cuts while asking suppliers to also to shoulder the costs of product development, warranty and production tooling.

Robert Lutz, GM's vice chairman for product development, made a similar pitch in early August at the Management Briefing Seminars in Traverse City, Mich.

"We don't want to put the squeeze on everyone," Lutz said. "Tell us if we're making mistakes. We're not afraid of new ideas, but we are afraid of old ideas."

But on the same day at the conference, Metaldyne Corp. CEO Tim Leuliette shed light on the rift with automakers as he he publicly vented the frustrations that many suppliers have felt privately.

"The Big 3 cannot return to their past glory by having the supply community financially subsidize their inability to address their own problems," Leuliette said.

Core values

Scheele's e-mail was not provoked by any specific incident, Ford spokesman Paul Wood said. In the message, Scheele, who started at Ford in 1966 and spent the first 12 years of his career working in purchasing in Europe, urged all Ford employees to recognize that their daily contacts with supplier employees "are fundamental to our joint ability to design and build great products."

The message reiterates Ford's core values, set three years ago, that call for trust, consistency, facts and "think value not price," in dealing with suppliers. Yet Scheele acknowledges that the automaker's track record in observing the values "was uneven."

It was during that time that Ford waged a public war with Firestone over the recall of tires. The company is currently trying to find $3 billion in cost reductions by 2005 via from its Ford North America Design Cost Sharing Program.

Narrow focus on price

The Big 3's price focus on only price frustrates suppliers, said Neil De Koker, managing director of the Original Equipment Suppliers Association of Troy, Mich., which has 279 members.

Still, De Koker says he sees ho's hopefulhe's hopefulpe on the horizon.

In early June, Bo Andersson, GM's worldwide purchasing chief, tried to soothe concerns by supplier executives at a breakfast meeting. In a follow-up letter to De Koker, Andersson wrote, "Please don't hesitate to call me with concerns regarding the way we are running our businesses."

But not everyone is convinced that that Big 3 executives and their parts making counterparts are ready to make peaces.

"It's great public relations," says industry con******t Craig Fitzgerald, "but where is the change in practices?" Suppliers must still absorb higher steel costs, accept greater warranty and recall costs and continue to bow to price cuts.

"They (Big 3) may have changed their view at the top," says Fitzgerald, a partner with the firm Plante & Moran LLP of Southfield, Mich., "but it has not filtered down to the daily practices at the buyer and engineer level."

Here is Ford Motor Co. COO Nick Scheele's e-mail message to employees on Aug. 18.

We conduct our daily business through thousands of cross-functional contacts between Ford and supplier employees. These daily interfaces form the fabric of our business and are fundamental to our joint ability to design and build great products.
Three years ago, the Company endorsed a set of core vales that should underlie Ford's business relationships with its suppliers.
Act like a partner to be a partner.
Trust and be trustworthy.
Communicate with consistency.
Be fact based.
Think value, not just price
... to be the Customer of Choice.
Across the Company we have many touch points with suppliers (PD [product development], Purchasing, Manufacturing, etc.) and we recognized that our track record in observing these values was uneven. Nevertheless, we agreed cross-functionally that conducting business in a manner consistent with these values is essential to Ford's long-term success.
Our suppliers can choose the customers with whom they do business. If we are not our suppliers' customer of choice, they will dedicate their best people, invest their best resources, and offer the newest technology and innovation to our competitors - putting Ford at a competitive disadvantage.
Make no mistake, the industry is highly competitive and - more than ever - we need to be resolute in our drive to address the tough business issues that we face every day. In these times, it is more important than ever that we be unwavering in adhering to a values-driven mind-set in our approach to daily supplier interfaces.

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