Ford Motor Co. shares the blame for the rising cost of parts used in its vehicles, the automaker's top purchasing executive said.
David Thursfield, executive vice president for international operations, said Ford frequently drives higher costs into its vehicles, then seeks to recover the costs by arbitrarily going after its suppliers' profit margins in what he called ``this annual dance.''
Ford has targeted 15 percent global cost-reduction in the next two years - which would equal $5.6 billion.
But Ford's new cost-cutting strategy is not a scheme to grab supplier profits, Thursfield repeatedly told a Nov. 14 gathering of auto parts executives and investment bankers in Pontiac, Mich. ``It's not your margins we are chasing,'' he said. ``That's not where the billions of dollars in cost savings will come from.''
To chief executive officers of suppliers long accustomed to the drumbeat of price-cut demands, Thursfield's words were a welcome change.
``I'm ecstatic,'' said Neil De Kokker, managing director of the Original Equipment Suppliers Association of Troy, Mich., which represents about 300 parts makers. ``There finally appears to be an awareness that the old system of beating each other down with price reductions wasn't doing anybody any good.''
Thursfield's comments capped a week of talks with the CEOs of Ford's top 100 suppliers. He explained the new cost-cutting strategy and acknowledged Ford's complicity in its bloated costs.
In his speech, Thursfield said Ford gave away too much responsibility to its suppliers, and should do more work itself. He cited last-minute design changes as a major contributor of extra costs and said Ford should use more carry-over parts.
He also said Ford will attempt to give its suppliers better marching orders.
To underscore his theme of ``get the value you want, but not the cost,'' Thursfield cited the $3 that Ford of Europe recovered from each $40 roof rack on the Ford Focus by questioning why the rack was specified to support 222 pounds - far in excess of any need.
The rack's carrying capacity was cut 25 percent by replacing its aluminum feet with feet made of less-expensive, lightweight steel, Thursfield said. The change was invisible to buyers because plastic caps cover the feet.
When you use 300,000-400,000 racks annually, he said, the savings are substantial. ``Ford drove that extra cost into the system, not its suppliers.''
Thursfield also cited Ford's failure to reduce the capacity of its catalytic converters, even though the automaker was building cleaner-running engines. Instrument panels were built to withstand minus 40° F, when a lesser specification would have sufficed.