Ford Motor Co. reduced total automotive costs last year by $3 billion, and suppliers were a big part of that effort. Jacques Nasser, president of Ford Automotive Operations, wants this year's cuts to reach $1 billion or more. He was interviewed by John Couretas of Automotive News Europe.
How would you rate the performance of your suppliers in 1997?
From a Ford perspective, we've really appreciated very much the tremendous support we got from our supply base last year. It is a different world that we're competing in, and we recognize that we have a lot to do.
We're well on the way to improving our own situation internally, but we can't do it alone. We need the help of competent, world-class suppliers. I'm looking at it with a reasonably contented pair of eyes at the moment. But we've still got a lot to do in almost every area of the business.
What are you looking forward to in 1998?
More of the same, really. More intense effort on quality and cost and also in the area of being more nimble. We wouldn't ask our supply base to do anything that we're not prepared to do.
What are your cost-cutting targets for 1998?
We talk in a total-cost manner because I think that's the best way to get the best bottom-line result for everyone. Last year, we reduced our total cost base worldwide by $3 billion, which was an unprecedented effort for us. This year, we have set ourselves a target of $1 billion, and we already know that that's probably not enough. Our plan is to beat that 1/898 target by a fair margin because that's the way the industry's heading.
Do you have a specific benchmark for reducing supplier costs?
It differs by commodity, and it differs by supplier. I don't think it helps to group everyone together. Not everyone is at the same level of efficiency and delivery. Yes, there are specific targets. But we should not have the mind set of, 'Well, that's the target, we'll achieve it, and that'll be the end of it.' There's not an end to it.
Do these targets also apply to Ford's Visteon parts subsidiary?
Carlos Mazzorin (vice president of purchasing at Ford Automotive Operations) views Visteon with the same pair of eyes that he views any other supplier. I know that because I see the relationship between the Ford purchasing activity and Visteon.
Do your suppliers believe that?
I don't know. I think over time they will see that we didn't establish Visteon just so we would have another brand. There's a real fundamental, operating reason for the establishment of Visteon as a separate entity. That is, so we can focus on quality and productivity and delivery and technology.
And (Visteon President) Charlie Szuluk hasn't been a shrinking violet. He wants to be viewed, and is viewed, as an independent supplier. As a supplier that has to compete for the business.
And as a supplier that intends to grow beyond the present Ford base.
Is Visteon getting its legs as an independent supplier?
There has been great progress. I think the team is very well focused and coordinated on improving the business and looking for growth opportunities. And I think, finally, they've taken a realistic view of the required level of technology to be competitive in the marketplace.
Do you share the current enthusiasm for modularization?
It depends on what your definition of modular assembly and modular manufacturing really is. To me, it's an extension of platform flexibility. In other words, if we can get to a point where we have vehicle platforms that are common and interchangeable and flexible in manufacturing within an assembly plant, you can then bring in integrated systems that in a sense just slot into platforms. Then I can see the sense in heading toward more modular manufacturing and assembly.
A lot of suppliers promise modularity. Can they all deliver?
It is very dangerous if the company involved, the operation involved, really doesn't have the expertise and the technology and the quality processes to make this happen. It isn't just hanging all these bits and pieces together. That's not the value of a trend toward more modular design.
Does the economic turmoil in Asia-Pacific offer you bargain-hunting opportunities for parts and materials?
We've always looked at purchasing on a more global pattern. And I know Carlos and his team are looking for sourcing opportunities in the Asia-Pacific area, beyond where we are today. But I know Carlos feels very strongly about this, and I do also, that you should not take the flavor-of-the-month approach, in terms of resourcing.
The situation in Southeast Asia - with the weaker currencies and the economic problems they're going through now - we believe is temporary. To change your complete sourcing strategy based on what could be a temporary situation would be a mistake.
I wouldn't knee jerk into changing our sourcing because of what's happening in the currency markets.
Have suppliers done a good job of following you into emerging markets? Is it still a tough sell?
I think our suppliers have really bent over backward to do the right thing, for them and for us. And it hasn't always been easy, because in many of these markets it's a relatively new situation for everybody. The market dynamics have changed dramatically over the last three, four, five years.
Do you see a convergence in many of the new electronic technologies that are being developed for vehicles, such as the Internet, the cellphone, navigation systems and the like?
A lot of these functions tend to start as items or attributes that nerds want, and then they become mainstream. I think that many of these items - communication systems, security systems, tracking systems, navigation systems - will more and more become mainstream wants by customers. I can see a more integrated electronic system within a vehicle. That will become more and more a desirable feature.
And will people want to pay more for this stuff?
They won't want to pay as much as everyone thinks, and that's where the real trick will be. How do you integrate them into the vehicle without really upsetting the value equation?