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Old 10-13-2003, 08:48   #1 (permalink)
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U.S.A.:Engineering: Ford takes control 500 new employees will monitor parts

Suppliers lose clout

By Julie Armstrong
Automotive News / October 13, 2003

Moving back These are the areas that Ford is focusing on initially to reclaim engineering expertise.
Brakes,Electrical systems,Engine cooling,Climate control,Multimedia,Powertrain,
calibration,Safety restraints,Seats,Tires, and wheels.

DETROIT - Ford Motor Co. is hiring 500 engineers to regain control over parts engineering and pricing - even as it eliminates other jobs and scours the company for savings.

The move reverses Ford's decade-long strategy of asking suppliers to engineer the parts. But Ford will not resume manufacturing those parts.

Vehicles developed under Ford's new engineering strategy will begin production next year.

Ford began to bolster its engineering staff about a year ago. It is one of several efforts to deal with quality problems that hampered the launches of the Ford Focus, Escape and Explorer.

The engineers will oversee nine major commodity groups. (See list on Page 40.)

"With a relatively small investment in engineering, we'll get a lot back in terms of functional performance, commercial performance and quality," says Will Boddie, 58, Ford's head of North America engineering.

Suppliers hit

Ford's shift is bad news for suppliers that want to engineer systems, which is more profitable than producing components. Boddie says Ford would reclaim some engineering work from Visteon Corp., Robert Bosch Corp., TRW Automotive, Johnson Controls Inc., Lear Corp. and other Tier 1 suppliers.

But spokeswomen at Johnson Controls and Lear say they are not aware of changes in their business with Ford. And a Visteon executive minimized the impact on his company.

"Ford brought in some additional engineering capability they felt they needed," says John Kill, Visteon's vice president of product development. "But if you look, for example, at climate control, we're still doing a significant portion of systems engineering for Ford."

A decade ago, Ford, General Motors and what was then Chrysler Corp. began asking suppliers to handle engineering and systems integration.

Spokesmen for GM and the Chrysler group say their companies are not changing course. Both companies say they did not go overboard on outsourcing and have more control over engineering.

"A lot of people felt that giving engineering to suppliers was going to be a cost savings," Boddie says. "There was also some feeling that suppliers knew more about the parts they manufactured than we did so they could design them more efficiently."

Critical control

But Ford concluded a year and a half ago that it was wrong. It was paying too much and had given up too much control to the suppliers of the nine major commodity groups and as many as 69 other commodities.

"That supplier wants to use the parts that he manufactures. Therefore, he gets the profit," Boddie says. "The other components that he buys, he puts a markup on. When we looked at what was going on, we weren't necessarily getting the least expensive or best components. We're now buying all the components ourselves."

But Ford isn't taking over all engineering for those nine commodity groups.

"We're not exactly designing wheel cylinders for brakes or semiconductors on powertrain control modules," Boddie says. "If it's something absolutely critical to vehicle performance or if having control will give us a commercial or quality advantage, we want to do it."

Last year, Ford set up teams to review the case for engineering components. The reviews will be completed in two years.

Boddie says each team considers certain fundamental issues: Is Ford achieving the lowest cost? Does Ford have the right number of suppliers? How should Ford engineer the part?

It is not a foregone conclusion that Ford will bring all that work in-house. After reviewing window regulators, for example, Ford decided to let suppliers retain responsibility.

But it could end up cutting the number of window regulator suppliers it uses. Ford now has three or four suppliers, Boddie says.

TRW scrambles

Suppliers already are scrambling to replace lost business. For example, TRW Automotive is working to replace the brake business it will lose from Ford after current contracts expire.

"We really have no choice in the matter," says Sam Jenio, TRW's vice president of customer development for the Ford account. "It's a question of how you position yourself to get the most out of the new situation."

Boddie says no suppliers have complained to him. "I'm sure this has not been received completely positively by everybody involved," he says.

"On the other hand, I don't see any terribly negative relationships that have developed as a result of this."
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