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US:Parts firms seeing shift;Ford's cost cutting streamlines its group of suppliers

Parts firms seeing shift
Ford's cost cutting streamlines its group of suppliers



Ford Motor Co. says its new plans for broadening its Way Forward cost-cutting efforts should have no surprising impact on key suppliers because the automaker already was taking steps to streamline its supply chain and target its spending with top performers.

In September, Ford began the first phase of cutting by half its network of more than 2,000 suppliers. The company said it was seeking to save money by spending with fewer suppliers that could provide the best value and innovations to Ford in exchange for secure, long-term business.

Paul Wood, Ford's spokesman for manufacturing and purchasing, said Friday the supplier restructuring was moving along as planned. Ford spends $70 billion annually on car and truck parts.

"It is highly important to meeting the company's cost objectives," he said.

So far in the first phase of its supplier restructuring, Ford has identified 36 companies as the best global suppliers of the 20 vehicle parts considered most crucial to manufacturing, from axles and audio to wheels and wiring. Six of the 36 suppliers already have seen $1.8 billion in new long-term contracts or existing contracts that have been extended long-term. Ford expects to wrap up the first phase soon.

In January, Ford unveiled an overall company restructuring that it dubbed Way Forward, a six-year plan to idle 14 plants and eliminate 34,000 jobs, among other cost-cutting moves. On Thursday, CEO Bill Ford announced that the company was reassessing its effort and would take additional cost savings within 60 days.

After years of strained supplier relationships, Thomas K. Brown, Ford's senior vice president of global purchasing, said at a meeting in October with more than 700 suppliers that change was the only option for Ford's supply management.

"The business model that has dominated our supplier interface over recent years is not working," Brown said. "When my day is dominated by issues related to financially distressed suppliers, commodity price shocks, quality problems and cost issues, it's clear to me that there must be a better approach."

That meant steering business to fewer companies. Hypothetically, Ford would have three seat suppliers instead of 12, and those three would get 100% of the seat business globally, Wood said.

That enables the suppliers to better invest capital and better utilize their plant capacity, Wood said.

A spokesman for Delphi Corp., one of Ford's 36 preferred suppliers, said the company embraces Ford's new approach and understands the need for change in a competitive marketplace.

"We know what it's like to go through dramatic changes," said spokesman John Shea, referring to Delphi's current bankruptcy restructuring. "The one constant is that you do whatever you need to do to take care of your customers."

Delphi is helping develop Ford's hybrid battery program, serving as a systems integrator. Ford has said working with a reduced number of suppliers spurs innovation and technology.

Shea said that, because Troy-based Delphi is one of Ford's strategic suppliers, Delphi is involved early in the design phase of any given technology, sometimes getting five years or more of advance notice and planning time.

"The advanced sharing of information allows us to better prepare staffing for manufacturing and engineering, which is important," Shea said.

Tower Automotive Inc., which has not been selected so far as a preferred supplier, is nonetheless working to maintain flexibility to meet Ford's needs and keep its business relationships, said Joe Kirik, a Tower spokesman. The Novi-based supplier, which filed for bankruptcy protection last year, depends on Ford for more than 30% of its business.

"Ford is a valued customer," Kirik said. "As with all of our customers, we're prepared to respond to variations in market demand."

It will take time to see just how well Ford's supplier restructuring works, said Steve Widdett, executive vice president of Plymouth-based Hella North America Inc., a lighting supplier.

"I think the biggest issue is the development of trust to a greater level than what was there historically," said Widdett, who has global responsibility for sales to Ford and General Motors Corp. "That's kind of the long-term process to increase the confidence of both the supplier and Ford in doing business on a long-term basis."

Widdett said one common obstacle to innovation that many suppliers wrestle with is the fear of spending money developing technology for which Ford might not have long-term plans to implement.

"Now we can invest money with a higher level of confidence," Widdett said. "But clearly, that's something that'll have to be proven. It's a change for them, and it's a cultural change for us."

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.....
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