Ford, GM Put Squeeze on Parts Suppliers for Price Cuts

DETROIT November 17, 2003; Dow Jones reported that Ford Motor Co. and General Motors Corp. , facing heightened competitive pressure from foreign auto makers, are setting rigorous new targets for price cuts by their parts suppliers, Tuesday's Wall Street Journal reported.

The moves underscore the growing globalization of the automotive industry, as auto parts, and entire vehicles, increasingly flow across borders in pursuit of economic advantage. Indeed, Ford executives told 100 of the company's top suppliers at a meeting earlier this month that their prices eventually must match those of their lowest-cost rivals, including ones based in low-wage countries such as China.

GM and Ford are straining to boost profits, which have been hit in their core North American market by two years of industry price wars. Detroit's Big Three auto makers, which also include DaimlerChrysler AG's Chrysler unit, need whatever cost cutting they can achieve to ease the painful consequence of selling vehicles with an ever-increasing amount of consumer rebates and low-cost financing deals.

GM has warned suppliers that in order to retain business with the Detroit- based auto maker, a supplier would have 30 days to come up with corrective measures if its price is found to be higher than that of a rival's.

GM, Ford and Chrysler have for years been squeezing their parts suppliers, as the auto makers' profits and market share have come under increasing pressure from Japanese and European rivals. Ford's latest demand ups the ante by more explicitly pitting its established suppliers, including Delphi Corp. , TRW Automotive Inc. and Visteon Corp., against rivals in low-wage markets.