A new global tooling policy at Ford Motor Co. will put the burden on suppliers to do a better job of sourcing the molds, dies, fixtures and other specialized equipment used to make commodity-type auto parts.
But suppliers still will be able to recover the cost of tooling in the prices they receive for those parts.
``We think the suppliers will buy the tools smarter than us and reduce our costs and theirs,'' said Ford spokesman Ron Iori.
The Supplier Owned Tooling Strategy, as Ford calls it, is set to begin with the 2003 model year. Parts contracts for the 2003 cars and trucks are being awarded now.
Beginning Jan. 1, 2000, the policy will cover all tooling orders and repairs of less than $20,000. The policy was first reported by Crain's Detroit Business, a Plastics News sister publication.
One upshot of the tooling strategy is likely to see suppliers scrambling for inexpensive tooling — perhaps turning to new sources in developing countries. That would be a big culture change for many suppliers. In North America, for example, most parts makers source tooling domestically, where they have established relations with local tool builders.
In an internal memo, Ford said that suppliers may ``get the benefit of procuring their tools from countries with weaker currencies and leverage this opportunity to achieve piece price targets.''
That sounds fine on paper, but shifting tooling sources offshore can add risk and cost to a supplier's business, said Louis Papp, a consultant to the Canadian Association of Moldmakers in Windsor, Ontario. Currency fluctuations alone can remove any cost advantage on some jobs, he said.
``Ford will not save money in the end by pushing that,'' Papp said in an interview with Automotive News, a sister publication to Plastics News.
But, he said, quality tooling is increasingly available in developing countries. China, for example, has a growing toolmaker base for plastic parts; but often they are few and far between, Papp said.
Traditionally, suppliers charged Ford for tooling by passing on the cost to the automaker. Ford then retained the tools' ownership and carried their value on its books. Retaining ownership of tooling — and control over parts production — has been viewed as something akin to a birthright by automaker executives.
Under the new policy, tooling cost for certain parts — mostly commodity-type components — will be shifted to the supplier, which will fold these expenses into engineering-related overhead. The suppliers will own the tools and carry them on their books. But Ford will retain the right to lease or buy the tooling, in case the supplier shuts down production because of a labor strike or some other business interruption.
Ford still will own tooling for parts it views as critical to its vehicles' design or function.
Papp was philosophical about Ford's new policy. As the industry becomes more global, many of the old ways of buying tooling inevitably will change.