Post by TonyV on Apr 24, 2010 10:34:03 GMT -5
Last Updated: April 24. 2010 1:00AM .
Ford cuts new offers to suppliers
Purchasing boss Brown says market still has too many suppliers, sees more bankruptcies
Bryce G. Hoffman / The Detroit News
Dearborn -- Ford Motor Co. purchasing boss Tony Brown says there are still too many parts manufacturers and warned that more suppliers will fail this year.
"We're not done yet," said Brown, Ford's group vice president in charge of global purchasing, during a briefing for reporters Friday. "There's still some excess capacity out there and, frankly, if it was an action I could take unilaterally, I'd take it out -- because as long as that excess capacity is in the system, it weakens those that remain."
He might not be able to weed out parts firms himself, but Brown said Friday he will offer new business to far fewer suppliers this year than he did in 2009.
Industry experts agree that too many suppliers exist for the deflated demand for cars and trucks, both in the United States and around the world.
"There is going to be more consolidation," said Neil De Koker, managing director of the Original Equipment Suppliers Association, an industry group that represents parts manufacturers. "We are surprised that we didn't see more suppliers leave the industry last year."
According to the association, almost 60 suppliers filed for bankruptcy last year, and as many as 200 simply turned off the lights and closed.
Ford, which is five years into an aggressive consolidation of its own supply base, will be offering major new business to about 850 suppliers this year, compared with 3,300 at the end of 2004. And Brown still wants to cut about 100 more suppliers.
"With 3,300, you cannot have a good relationship. You can with a manageable number, which we've determined to be about 750," said Birgit Behrendt, director of global programs and head of purchasing for Ford of Europe. "We want to become the customer of choice for our suppliers."
Ford's plan, which draws on a strategy long used by rival Toyota Motor Corp., is to work with fewer suppliers but give those it keeps deeper, more long-term commitments.
Ford had been viewed as one of the worst manufacturers to work with in the world, but Behrendt said this approach has dramatically improved the way parts manufacturers view the company.
"Our suppliers have recognized that we've changed," Behrendt said, adding that many are now willing to share their best technologies with Ford before offering them to other carmakers.
Ford pointed to a new report by UBS Investment Research that found Ford is the "most preferred" customer for 53 percent of suppliers surveyed, putting it ahead of Toyota, which has historically been the most favorably viewed by parts manufacturers.
However, the study polled a handful of suppliers. Next month, a far more comprehensive report is due out from Planning Perspectives Inc. of Birmingham. Firm President John Henke said Ford has improved significantly but still does not rival either Toyota or Honda Motor Co. when it comes to supplier relations.
"If we go back to 1992, no domestic has ever come close to Honda and Toyota -- ever," he said.
Henke also agreed that more supplier consolidation is likely, and he said large manufacturers are starting to shed less-profitable business units.
"They really need to batten down the hatches, decide which games they want to play in and then play to win," Henke said.
The failures will likely be among the smaller suppliers, he said.
Ford's Brown agreed that smaller manufacturers are most at risk, particularly as the financing deals they negotiated to survive the past few years come due and credit markets remain tight, particularly for those in the automobile industry.