Ford On Track To Reduce Costs

LOUISVILLE, Ky. Bruce Schreiner writing for AP reported that Ford Motor Co. has made faster inroads than expected in cost cutting as part of a massive restructuring, the company's second-ranking executive said Monday while visiting a factory.

The nation's second-largest automaker is about 20 percent ahead of its target to reduce costs by an average of $200 a vehicle this year, said Nick Scheele, Ford's president and chief operating officer.

Ford, which reported losses of $5.45 billion last year, has set a goal of cutting costs by an average $700 per vehicle by 2005. In January, the company announced a restructuring plan that called for the elimination of 35,000 jobs and five plants.

Scheele, who was in Louisville to celebrate the production of the 5 millionth Ford Explorer, said the better-than-expected cost savings doesn't mean the automaker will meet its ultimate goal sooner.

``It means we have a long way to go, a very long way to go, and we will keep plugging away,'' Scheele said in an interview. ``I wouldn't characterize it as, `Eureka,' or, `we've got it licked,' but we are better off than we could have been.''

Just a couple of months ago, the company wasn't optimistic about meeting its savings goal, Scheele said. He credited engineering and redesign changes for the savings, not any elimination of features.

For instance, a frame redesign in the Explorer will save the company about $40 million yearly — or about $90 per frame, Scheele said.

Ford netted additional savings by changing the process of installing sun roofs on a number of models, Scheele said. The average savings is about $19 per vehicle, he said.

David Cole, president of the Center for Automotive Research in Ann Arbor, Mich., said the pace of cost savings is good news for Ford shareholders, employees and customers.

``This is not the kind of thing where you can have huge savings quickly,'' he said. ``But you want to get on the track of making continuous improvements over a long period of time. And it sounds like they are on that track.''

Chris Cedergren, an analyst with Nextrend, an automotive market research firm, said cost cutting is just one part of the equation that Ford needs to focus on to regain financial strength.

``I think the cost cutting is fine, and if they're ahead of projections that's terrific,'' he said. ``But cost cutting in itself is really not the answer. What is the answer is building your revenue through new business opportunities and more importantly more premium pricing.''

Scheele predicted that incentives packages will remain a common standard as the auto industry tries to tempt customers. He said Ford's spending on incentives is down this fall from a year ago.

``My suspicion is that incentives will stay on the market for some considerable time until we see very, very solid economic recovery, and we're clearly not seeing that yet,'' he said.

Meanwhile, Scheele manned the wheel as the 5 millionth Ford Explorer rolled off the assembly line Monday, a milestone for a vehicle that weathered a tire-recall controversy to reach record sales last month.

The Explorer has been the best-selling sports utility vehicle every full year of its existence, but it reached new sales heights in August when more than 51,000 of the vehicles sold, its best sales month ever and up 33 percent from August 2001.

Ford and its popular Explorer had been dogged by a costly tire recall involving Bridgestone/Firestone Inc. tires. In most cases, the tire lost its tread, causing an Explorer to roll over.

Ford says it has spent about $3 billion to replace 10.6 million Firestone tires between May 2001 and this past spring.