Reuters / December 17, 2002
CHICAGO -- Tower Automotive Inc. said on Tuesday that it will not supply the frame for the next-generation Ford Explorer sport-utility because the business is not expected to be profitable enough.
"Our decision is based strictly on the fact that the expected returns at targeted pricing levels did not meet our requirements," Tower President Dug Campbell said in a statement.
Tower produces the frame for the Ford Explorer at its Corydon, Ind., plant. The plant employs about 800 people, most of whom are members of the UAW.
A Tower spokesman declined to comment on the plant's future. Options could include closing the plant, selling it to a company that would continue to make Explorer frames, or producing structures for other vehicles there.
A UAW spokesman was not immediately available for comment.
Ford Motor Co. has not said when a new Explorer might be introduced. The 2002 model debuted about 1-1/2 years ago.
Tower of Grand Rapids, Mich., said the decision does not affect its previously announced backlog of $1.4 billion of new business.
Tower has said 35 percent of its revenue is derived from business with Ford.
Shares of Tower were pressured in September after investors interpreted remarks by a Ford official that suggested Tower was vulnerable to pricing pressure from Ford that could erode its profit margin.
Ford COO Nick Scheele had said Ford worked with Tower to save $40 million a year on the Explorer frame, redesigning it to use less metal.
Automotive component suppliers are under intense pressure from automakers to cut costs. They typically face demands for price reductions ranging from 1 percent to 8 percent a year, according to the Original Equipment Suppliers Association.
CHICAGO -- Tower Automotive Inc. said on Tuesday that it will not supply the frame for the next-generation Ford Explorer sport-utility because the business is not expected to be profitable enough.
"Our decision is based strictly on the fact that the expected returns at targeted pricing levels did not meet our requirements," Tower President Dug Campbell said in a statement.
Tower produces the frame for the Ford Explorer at its Corydon, Ind., plant. The plant employs about 800 people, most of whom are members of the UAW.
A Tower spokesman declined to comment on the plant's future. Options could include closing the plant, selling it to a company that would continue to make Explorer frames, or producing structures for other vehicles there.
A UAW spokesman was not immediately available for comment.
Ford Motor Co. has not said when a new Explorer might be introduced. The 2002 model debuted about 1-1/2 years ago.
Tower of Grand Rapids, Mich., said the decision does not affect its previously announced backlog of $1.4 billion of new business.
Tower has said 35 percent of its revenue is derived from business with Ford.
Shares of Tower were pressured in September after investors interpreted remarks by a Ford official that suggested Tower was vulnerable to pricing pressure from Ford that could erode its profit margin.
Ford COO Nick Scheele had said Ford worked with Tower to save $40 million a year on the Explorer frame, redesigning it to use less metal.
Automotive component suppliers are under intense pressure from automakers to cut costs. They typically face demands for price reductions ranging from 1 percent to 8 percent a year, according to the Original Equipment Suppliers Association.