Supplier Survey Suggests Ford Pushes Cost Over Quality

DETROIT AP is reporting that a survey shows that supliers believe that Ford Motor Co. places more emphasis on cost than quality in choosing suppliers and is the worst of six major North American automakers in making late engineering changes.

The annual OEM/Supplier Benchmark Study was conducted by Birmingham-based Planning Perspectives Inc. and includes responses by more than 225 suppliers, the company said.

But Ford says it is working with its suppliers to satisfy the need to both cut costs and improve quality.

"The only way we can meet our quality and cost objectives is working in concert for our mutual benefit and, most importantly, for our customers," said a statement issued by Ford Wednesday. "Our efforts have produced some progress and good results but we also are aware that there is still a great deal more to achieve."

The pinch between having to cut costs while maintaining quality is a real dilemma, says the head of a supplier trade organization.

"I can't say supplier lower quality because of pricing pressures," said Neil deKoker, who heads the Original Equipment Suppliers Association.

"We focus even more on quality to differentiate ourselves from the pack to maintain our business," he said.

Ford is almost six months into a $9 billion turnaround plan that includes eliminating 35,000 jobs and closing five plants.

Cost cutting is a major element of the plan. The company has added 700 engineers to the 300 already working since January to investigate ways to trim production costs.

The goal is a $700 reduction in production costs per vehicle by mid-decade.

Ford chairman and chief executive Bill Ford noted in a speech to financial analysts earlier this month that the company must not produce poor-quality products in its effort to show $7 billion in annual pretax operating profit by mid-decade.

Indeed, the responses to the survey taken this spring may actually reflect sentiments regarding Ford still simmering since the days of former CEO Jacques Nasser who retired underpressure last October, according to one analyst.

"The start of new philosophy didn't occur until January. They won't have much effect in first 12 months," said Jim Hossack, an analyst with AutoPacific Inc.

According to the study, Japanese automakers Honda Motor Co. and Toyota Motor Corp. are the best automakers to deal with and put the most emphasis on quality.

General Motors Corp. and the Chrysler Group of DaimlerChrysler AG rank between Ford and Nissan Motors Corp. according to John Henke, president of Planning Perspectives and professor of marketing at Oakland University.

None of the suppliers contacted would respond to the partial results of the study. The full results are to be released in mid-June, Henke said.

Planning Perspectives is an 18-year old management consulting firm that performs customized research for its clients.

The annual J.D. Power and Associates initial quality study is scheduled to be released Thursday. The study looks at problems with vehicles reported by customers in the first 90 days of ownership.

The study is viewed as an important barometer of an automaker's overall quality.

In last year's study, Ford quality stagnated and all the U.S. automakers lagged behind the Europeans and Japanese companies.