Ford to Buy $1 Billion a Year in Chinese Auto Parts by Mid-2003

DETROIT September 17 The Wall Street Journal reported that Ford Motor Co. will likely procure a billion dollars worth of automotive parts a year from suppliers based in China by the middle of next year, said Nick Scheele, Ford's president and chief operating officer.

Speaking in an investor forum in New York Tuesday afternoon, Ford's No. 2 executive said its move to boost Ford's presence in China as a buyer of auto components is part of its strategy to "keep ahead of the competition" in cost- cutting.

Buying parts in China "is going to be a significant opportunity," Mr. Scheele said. "We have a purchasing team in China since April of this year. We will have a billion dollars of sourcing from China by the middle of next year," he said.

After reporting losses of $5.45 billion last year, Ford is in midst of a major restructuring, including a target of cutting vehicle costs by a total of $700 per vehicle by 2005 or 2006. Ford executives have said the auto maker's total cost burden still is likely to increase this year as a result of rising fixed costs, although the total-cost figure is expected to begin to decline next year.

Mr. Scheele said promoting "commonality" among parts used to build vehicles is another significant way in which Ford is trying to save money.

"We have been creating 'all-new' vehicles, and we need to get back to" reusing more of parts carried over from previous models, Mr. Scheele said. He added that Ford management has begun mandating a minimum 50% carryover or reuse rate for components as part of the company's product-development process.

Mr. Scheele reiterated that Ford is running about 20% ahead of targets for cutting costs on its vehicles this year after stepping up efforts in the last 60 days. Mr. Scheele said the cost-cutting efforts mean Ford is likely to beat its target of reducing costs by an average of $200 a vehicle this year by about 20%.