Tower: "Hey Ford You Can Take This Job And Shove It"

Detroit, Michigan December 18, 2002; John Porretto writing for AP reported that Tower Automotive Inc. said it will not make the frame for the next-generation Ford Explorer because of profitability concerns, news that analysts say reflects ongoing difficulties between Ford and some suppliers.

Tower's share price spiraled to new lows Tuesday before rebounding in late trading.

Ford, nearly one year into a five-year revitalization plan, is aggressively pursuing ways to cut costs and improve profits. As such, analysts say, the world's second-largest automaker is placing pressure on suppliers to reduce expenses.

In this case, Tower wasn't able to make the numbers work.

"We've been active in the early design and bid process for the next Explorer," said Dug Campbell, president and CEO of the Grand Rapids-based auto components producer. "Our decision not to support this particular product renewal is based strictly on the fact that expected returns at targeted pricing levels did not meet our requirements."

Tower makes the frame for the Explorer, America's best-selling mid-size sport utility vehicle, at a plant in Corydon, Ind., that employs 800 people.

It said the factory's status was not certain, though Ford is not expected to start making its next-generation Explorer until at least 2006.

Ford said it doesn't comment on sourcing decisions or product plans.

In January, Ford laid out a restructuring plan that called for eliminating 35,000 jobs -- 10 percent of its work force -- closing five plants and eliminating four models.

The company also said it wanted to improve profits by $9 billion by mid-decade. Ford lost more than $5 billion in 2001.

More recently, Ford said in October it would cut another $1 billion in expenses next year.

"That was the latest salvo" alerting suppliers that they'd better be tackling costs, said Mike Wall, an analyst with the automotive forecasting firm IRN Inc. in Grand Rapids.

"I think what you're seeing with Tower is suppliers starting to push back a bit," he said.

With at least a few years before an all-new Explorer, Ford has ample time to work with another supplier. But with its recent history of costly product introductions and the importance of the Explorer to its lineup, the company desperately needs a smooth transition, Wall said.

"They need to launch it, and they need to launch it well," he said.

Analysts said Tower could find another product for the Indiana plant or possibly sell it to the new maker of the Explorer frame. The company, which supplies every major automotive manufacturer, said it has a backlog of $1.4 billion in new business.

Ford is Tower's biggest customer.