Is Ford Wise To Cut Suppliers?

[Mr. Pebble]

Ford has announced that is expects to save a bundle of money by reducing the number of suppliers and eliminating a bunch of salaried employees. Is this going to be a big savings or just another "Crate and Shift" project that counts the wage savings while the cost is transferred to another account, lost in the bureaucratic hiding places of refuge.

Let's look at a few considerations. First, saving costs in purchasing is a concept thousands of years old and certainly available to Ford decades ago. If the idea is so good, intelligent management would have done it a long time ago. Second, isn't the whole purpose of purchasing the mission to find a quality product, delivered on time at the lowest cost? Going to no bid contracts always raises the cost but it is usually in pennies compounded billions of times over and easy to ignore. Third, the lower the number of suppliers, the larger the reliance on large companies who are more likely to have (much) higher costs, management less concerned with corporate survival and more directed toward their own bottom line. Fourth, Ford is turning control of critical decisionmaking to areas over which it has much less control and the results are often bad, sometimes catastrophic. Fifth, is this a competent management plan or a group of MBA underlings with Six Sigma training who have put together a plan that could only look good in the ivied halls and sold it to an unwary top management that relies too much on their "expertise."

With both Ford and GM in serious financial trouble and DCX shaky at best, none seem to want to address the real problems but dream of the glory days of a generation ago, shoot from the hip and issue glorious press releases that empower those who try to walk on water while keeping their collective heads perpetually in the sand.

Keep in mind, the corporate culture at Ford is totally different than that at GM. The best way to describe what is happening at GM is to think of a car barreling down the highway with a slow leak in each tire. As the air escapes and the tires are down to the rims, GM's response is to turn up the volume on the radio playing upscale music as the car goes slower and slower the driver happy to be doing 15 MPH on the Interstate Freeway among competitors going 70 MPH.

Ford, on the other hand, has a culture that just LOVES incredible achievement intermixed with horrible disaster. Is this new purchasing restructuring arrangement just another Edsel, Firestone or Escort (the disaster that chased me away forever), or another act of brilliance? Only a fool would bet on brilliance.

Like GM, Ford has to get away from the "Crate and Shift" mentality and start addressing its real problems but considering that Corporate America is in its third generation of empty diplomaheads coming out of our Colleges and spreading the Six Sigma and Lean Manufacturing cancer disastrously up the corporate ladders, it is not likely

When an army loses a battle because of dumb mistakes, it simply sends in more troops to be slaughtered by an army with better leaders. When Corporate America loses a battle, it just sends in more and more of the stockholders money, trying, with futility, to push the ocean of incompetence with a broom. When the army runs out of soldiers, the war is over. When corporations run out of money, it is Chapter 11. The army blames the politicians and corporations blame the UAW.

The proposal I wrote to help save GM, all 24,000+ words of it could also be applied to Ford as well but don't hold your breath. GM appears to be hopeless. The only question is - will Ford change the tires and get back up to 70MPH in an act of brilliance or will they "Crate and Shift" themselves into becoming a division of Toyota or Honda and slowly disappear from the face of the earth?

Both GM and Ford are bailing water out of the attic as the ceiling of the second floor becomes waterlogged. Will either one of them use the floorborads to build a boat and sail away or will they make a cribbage board and turn up the volume on the radio.

Lets see what happens!!

Mr. Pebble

[mchastek]

It's so hard to know where these monsterous companies are headed. Unlike the smaller companies that can zip to and fro like a speed boat, these behemoths like GM and Ford have to maneuver like an ocean liner. On top of that.. if there are only 10 employees at a company, it's fairly easy to see where the problems lie. If there are tens of thousands of employees, that can get unwieldy.

Having said that, I can't imagine that cutting suppliers is a good long-term plan. In the extreme, only having one supplier is like having a monopoly, which is never good for consumers.

It's very frustrating for me to hear about all of these problems, because the answer seems simple to me - BUILD SOMETHING PEOPLE WANT TO BUY!!!! It doesn't matter if you are able to cut costs to an absolute minimum and have huge profit margins if no one wants your product!

As a consumer, I buy cars that I like overall. Design, reliability, resale value, performance, feel, etc. I can honestly say there are no American cars that I'd buy right now, beside the Corvette. I suspect there are plenty of other people that feel the same way.

The imports are just a better mousetrap.

[Mr. Pebble]

Teaming up on Mr. Pebble, EH?

You make some very good points but consider this - You can only get so many economies of scale before you lose control and that is exactly what happened in my years at GM. Decisions were made on high and they actually got twisted around and by the time they got to the bottom, it told everyone to do as they wanted. The results were twisted back on the way up so the POO-BAHS heard exactly what they wanted to hear. When they came to visit the plant we painted the yellow stripes beside the path they were to follow and being good-old-boys and knowing their manners, they kept between the lines. We only painted the sides of the presses that faced those aisles and if everything looked pretty, we got rave reviews. How nice it is to be an Oligopoly with a very inelastic demand curve.

But, if what you say about big and unwieldy companies is true, take General Electric. They make nuclear reactors and railroad locomotives and own the market. They also make light bulbs and washing machines. They also make a lot of money. If GE can keep control over such an unwieldy combination of disparate products, why can't everyone else. GM owned the the diesel locomotive market with only ALCO (a former steam engine manufacturer) having an insignificant competitive share of the market. GE supplied ALCO and when ALCO decided to quit the market (about 1958), the geniuses at GE took over and proceeded to blow General Motors out of the market with more precision than Toyota is doing to GM now. GM has essentially never put up management with the competency to compete in anything and is slowly paying the price.

Another thing that has hurt the Big 3 is that they were late in getting product out in a timely matter. The Chevy Citation was originally to be brought out as a 1978 model and had been moved back to a 1980 model before they finished building the tooling. They corrected a ton of design errors but missed a whole lot more and the trusty Chevy II was replaced by a corporate disaster. The Japanese had perfected the quick changeover and therefore had a big edge in reacting to a very quirky market. GM was horribly late in getting into the retro market and is paying the price. Now, they are coming out with redesigned SUV's at the time that the market is collapsing. The Solstice is hitting the convertible market just as the norther half of the country is reaching for their woolies.

GM is trying to overcome its mistakes but its past is haunting it. The horribly low morale throughout the corporation and its traditional management practice of kissing up and stepping down has frozen all of the creative juices that are screaming from under the table for a chance to excel at what they are perfectly capable of doing - building great cars at an affordable price.

And don't forget the public. Your team is car guys who do pay attention to such things as quality, reliabiliy, design and performance but few others care. What really counts is the halo that the individual companies wear. People are fickle and would go with a winner image long before they would go with a winner car. That is something that GM has yet to understand. Look at Ford which did all of its research and came up with the perfect car, the Edsel. Some bright bulb finally told Ford that rather than ask people what they wanted, they should have asked what their next-door neighbor wanted. THAT is what they should have made.

True, the Japanese came to America with a better mousetrap and their reliability is legendary. The Big 3 have focused on fit and finish but neglected reliability and it shows in every issue of Consumers Reports. Take the Cadillac SRX. It is getting rave reviews on just about everything said about it. Sadly, its sales are pitiful and its deserves better. Unfortunately, it has not been on the street long enough to get a reliability score and that is where it may fall down but it carries the GM reputation and is a blip in a crowd of fierce competitors. Probably more than half have been sold to GM employees and employees of suppliers plus their own "in house" vehicles so few are sold to the public. Too bad, as it really deserves better but it just doesn't wear the halo.

And look at the Aztek, now out of production. You have to get used to it but it really has character. The PT Cruiser had the good press and a lower price. The Aztek certainly looks a lot better than the Element and the Xb but, again, Toyota and Honda wear the halo. Rather than issue puffy press releases and sell way below cost to get back market share, GM has to focus on reliability, starting with brakes, electrical systems and reliability and bring the product to the point where OTHER people are blowing the GM horn.

Look at some of the older Toyotas and Hondas. They are very unremarkable in appearance but they ran like a Swiss watch. I have also been in several Japanese owned manufacturing plants and, in spite of Kanban, Kaizen and all of the other goobledegook that has Americans in awe, they were not all that efficient either. But they are, simply better than we are but to clean their clock would not be all that difficult. Won't happen until the Big 3 come down off their high horses, roll up their sleeves and go to work, appropriately humble.

I worked at a GM plant that closed (Fisher Body Plant #1 in Flint, Michigan) which was a group of some of the finest and most talented people you could ever meet who sat around and did nothing while collecting fat paychecks for a long time and when GM was drowning in red ink in the eary 1980"s, we were among the first to go. Everyone was in denial and waited for new product. When they put the wrecking ball to the building, they said it was to build us a new plant to give us our jobs back. Five years later, they would sit in the local bars, still waiting. They have long given up but no one ever considered that the bean counters in Detroit could only do two things - count the money in and count the money out and when they saw the totals, we were toast.

You are car guys. If you want to read my proposal to GM you are welcome to a copy. It is over 24,000 words plus spreadsheets and only covers topics but there are some good stories of life at GM and living in a bureaucracy above all bureaucracies. GM has either chosen not to read it or not to listen. I have all but begged them to come up to Lansing and see examples of horrible waste but they are just not listeneing and never will. Sales are expected to be down dramatically on Monday and the Q3 report will follow and not be sweet but we can expect a flood of cheery press releases that show the streets paved in gold and all the world is a breath of fresh air.

Send an email address to berkprod@acd.net and you will get the GM report sent as Word and Excel attachments.

Mr. Pebble.

[fphilli1]

Mr Pebble,
One of the reasons Ford is cutting suppliers is the repurchase of a bunch of our old plant that we sold to Visteon. The other reason is we got carried away with minority suppliers and have way too many issues with their secon and third tier suppliers that we do not control. It was Mr. Nassar that drove us to the split off and diversity push for suppliers. It just has not paid off. Although piece prices were reduced by a bit the over all quality issues have increased. We are going to source a number of parts back into a supplier chain we can control better.

[Mr. Pebble]

Mr Pebble,
One of the reasons Ford is cutting suppliers is the repurchase of a bunch of our old plant that we sold to Visteon. The other reason is we got carried away with minority suppliers and have way too many issues with their secon and third tier suppliers that we do not control. It was Mr. Nassar that drove us to the split off and diversity push for suppliers. It just has not paid off. Although piece prices were reduced by a bit the over all quality issues have increased. We are going to source a number of parts back into a supplier chain we can control better.
Frank,

Blaming minorities, are we now? Sorry, no sympathy here. The problem is a leadership vacuum throughout the entire industry. The Big 3 dug a very deep hole for themselves and fully expected Tier suppliers to fill in the void but provided no leadership or direction, minority or not. If it is just minorities, explain Federal Mogul, Tower Automotive, Meridian Automotive, ASC, TNT logistics and a whole bunch of others who can't trip over their own stupidity fast enough.

I interviewed with a minority owned company that was doing sequencing for GM. The plant manager made a dumb comment that showed a reliance on B-School MBA stupidity and nothing else. I've heard it before from non-minorities and it didn't work there either.

I once took a supervisory job with a Tier 1 supplier doing subassembly and sequencing for GM, jobs that were outsourced from the local GM plant. The first thing they told me was that new hires were scum of the earth dregs out of a staffing agency. I took over training and put together a team beyond the wildest dream of any supervisor anywhere. We had the lowest cost, best quality, best delivery time, lowest overtime and they all acted responsibly with little supervision. I never wrote a reprimand and never even had to raise my voice. Not one was a white male Anglo. So much for that minority crap.

Judging from the news over the last few days, it does not look good for GM. Sales disaster in September, another downgrade in their credit ratings, sales of more assets to generate cash to pay the bills, huge losses on cars and trucks and in two weeks the dreaded Q3 report, certain to be a disaster. Still, GM continues to row the sand while it waits for the glory days of the past to come back for no good reason and anoint them with riches. This from a bunch of incompetent good old white boys.

And, don't worry, Ford is not far behind and the UAW will lose a lot more members while it keeps its head in the sand, right beside GM and Ford. Toyota and Honda leadership must be shaking their collective heads on how blowing out the not-so-big-two is like taking candy from a baby.

Frank, it's time to put away the blame game, and get GM, Ford and the UAW to roll up their sleeves, go to work and do the right things. It costs GM nearly $175,000 per year per worker for a 40-hour week but every time they show an assembly line on the news, I want to redefine my definition of slow motion. This is on top of all of those standing in the background and collecting the same pay for doing nothing but watching. I then go to the Burger King and watch $6/hour employees working their butt off in ways that auto industry hasn't seen since the 1930's.

One of the suggestions I made to a UAW plant facing closing was that they lay off the workers in 30 day rotations and, instead of unemployment and SUB, they would have to work at the local Walmart. From their $300 per week paycheck, $200 after deductions, health care and other benefits would be taken out and the worker would be given $80 and told to go home and support his/her family, makethe house payments and payments on the diesel powere hog in the driveway. After the 30 days, the employee would bring back the "How may I help you" vest and it would be hung by the door, a reminder of what is going to happen if they don't get off their fat butts and go to work.

Frank, the answer is simple. When Federal Mogul wanted to close a plant in St. John's Michigan, they demanded tax cut welfare from the State and concessions from the UAW. They got $65 million from the State to save 750 jobs in that plant and two others. Some deal. They were producing parts for a dollar when their competitors are doing it for seventy-five cents. They are still doing it for a dollar and the jobs are heading for Mexico anyway as they have no economic right to exist here. My suggestion was to try building two parts for a dollar and now thier competitors have no right to exist. They weren't listening and neither was the UAW. Kiss the jobs good-bye. I am still trying to get GM and the UAW to come to Lansing, Michigan and look at the horrible waste at out plants and facilities here. To date, no interest, the company is failing and UAW continues to lose members.

Frank, it's time to stop making excuses for failure and tell GM and Ford and the UAW to start doing the right things. Only then will the problems go away and they (and you) will find out it was never the minorities at all.

Mr.Pebble

[mchastek]

The following is a response typed on behalf of Mac Gordon, considered to be the "Dean of Automotive Journalists" and writer for Ward's Dealer Business and AutomotiveDigest.com. Mr. Gordon is the author of a book titled "The Iacocca Management Technique".


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Is Ford Wise to Cut Suppliers?

Response: Ford, in announcing a cutback of up to 50% in the number of “key” suppliers, is finally endeavoring to reduce its pyramiding costs in North American operations by adopting the methodology on parts of Toyota and other Asian automakers. Ford admits failure in its controversial (and supplier-detested) plan of annually pressuring for price cuts – or else. It wants to award supplier contracts over multiple vehicle cycles, rather than re-bid contracts for each model change. Key suppliers, now amounting to some 200, will be cut to about 100. The contention is that it will mean higher – not lower – costs, but it is in line with Ford’s belief that fewer suppliers can run closer to capacity and receive long-term contracts at guaranteed lower prices. Ford has already identified 7 “key” suppliers – Sweden’s Autoliv, Japan’s Yazaki, Canada’s Magna and American-based Delphi, Johnson, Lear and Visteon. These suppliers, plus 100 or so others Ford chooses to keep, account for about $45 billion of Ford’s annual global purchasing budget of $90 billion. The potential increase in capacity, combined with early involvement in product designs and longer contracts, spells higher product quality and lower warranty costs, according to Visteon COO Donald Stebbins, who agrees with Ford’s global purchasing chief, Tony Brown, that “it makes the process more efficient” – which, in turn, reduces prices and shores up profits.

Teaming up on Mr. Pebble, Eh?

As an ex-GM employee, Mr. Pebble makes some lucid points on how the GM “oligopoly” lost its way and is being shredded in the marketplace by the likes of Toyota & Company. Managers once capable found their decisions on products misguided as lower echelons settled for sloppy quality. The story is well-known, but to say that “to clean their clock (the Asians) would not be all that difficult” is rubbish. Their products are better-built, if not better-designed (a subjective matter). Durability proved GM’s weak suit, and led to the scarring of GM’s (and its domestic rivals) halo.

However, as an evaluator of all brands of vehicles, I would argue that GM, etc have caught up in the durability derby. Let’s be fair about that. The latest surveys show that the gap has been all but wiped out between Asian-car reliability over the long haul and that of Chevrolet, Saturn, Cadillac, Ford trucks and Chrysler Group minivans. GM is paying the price for its quality sins of the 1980s and early 1990s – but the June-July-August period did set a record for total sales as GM and Ford made some recovery strides. There remain a slew of GM hurdles out there before the battle is won – or at least stalemated. But GM still builds 4.5 million vehicles a year worldwide and has some big performers – Daewoo in Korea and East Asia, Holden in Australia, Opel rebounding in Europe and 26% of the U.S. market. The UAW, of which Mr. Pebble was certainly a member, doesn’t want GM to go bust and will accommodate GM (and hopefully Delphi) with legacy-cost givebacks. GM is far from being a dead duck, as Mr. Pebble implies.

[Mr. Pebble]

The following is a response to the comments of MAC GORDON written by Mr. Pebble. Mr. Pebble is a College Economics instructor of 31 years and former GM employee of 20 years. Mr. Pebble is widely recognized for his uncanny ability to predict future trends in the auto industry as well as the general economy. His efforts at uncovering political and corporate waste and corruption are legendary. He is the author of many papers including "Fool For Thought" (Iraq War), "The Inside Scoop on Hiring an Attorney" (expose), "Gross Partum" (Middle Class Rip-offs), "Weapons of Math Instruction" (Tutorials) and "Bankruptcy May Be The Best Option" (GM). Mr. Pebble has been advising that GM was heading for trouble for nearly 15 years, has a highly regarded lecture and presentation on the real issues of the trade deficit and has been openly critical of our educational system and its self-serving struggle to give every student an empty diploma and bleak future. Mr. Pebble ran for Mayor of Lansing, Michigan in 2001 and with only $500, managing 23% of the vote in spite of being outspent 1,500 to one.


Now, let's get to Mr. MAC. Well, I just can't agree with a lot of it. Funny how when the mucky-mucks of America take a stand, everyone falls into line and salutes the flag, even if it is upside-down. Then there are the purveyors of puff who lavish praise on even the most incompetent of firms, currying favor for the pennies thrown at their feet. Others make a good living as consultants, telling corporate America what they want to hear in return for big bucks and the title of "expert" in their field. Then there are those who subscribe to the "figures lie and liars figure" method in an attempt to earn a chance to rub elbows with corporate underachievers (that's all we have now) and are richly rewarded with massive publicity and lucrative contracts that offer the illusion of success in a world where even the best drown in mediocrity.

As we return from the woodshed, let me assure you that it is not good to see failure. But, it is worse to ignore our problems. It is like denial of a cancer diagnosis, it won't go away unless the problem is addressed with vigor, and ignored will bring a quick end to the problem as Bethlehem Steel, Builders Square, Arthur Andersen and a lot of others could tell you if they were only here.

The worst things are the purveyors of trophies who hand out praise for a fee. I call them "Puff Enablers" and they do no good. Some day, I am going to start my own car company and buy Pontiac G6's without the emblem. Every day two truckloads of ten will show up at my factory, a former Mr. Taco, and I will dutifull place an emblem on each side that reads "G7." In eight hours, two truckloads of ten will be on their way to my dealers. And. with a brilliant stroke of leadership, I will dutifully report to Powers and Harbour that I am now the most efficient car manufacturer in the world producing, with a little outsourcing, 20 cars per day, per employee. How efficient I am and as GM outsources its labor and calls it purchasing, thus reducing the number labor hours needed to build a vehicle, the numbers runners will crank out statistics, the media will sings the praises and the public will shine in the glory of American Industry while they unknowingly await the dreaded day when they will have to ask the last question - "What Happened."

Sorry, MAC, but I still know a ton of GM insiders and they are all attaching the handles to their briefcases and toolboxes and dusting off their resumes. I can't find anyone other than a bunch of arrogant and narrowminded UAW members and management hacks that who are not scared to death about losing their jobs and their company. And what is sealing the death warrant is the arrogance and stupidity of higher management that can't get off the corporate jets just back from the Cayman Islands, and put down their mint juleps long enough to save a venerable corporation. But then when you can get a $100 million golden parachute for sinking a company and quickly land another job doing the same thing (It's called the Chainsaw Al Dunlap's disease) within minutes after your chauffer drops you off at one of the country clubs you belong to, why strive for success. Don't worry, the media will cover for you, the public will never catch on and the survivors will be dutifully completing the oceans of Six Sigma paperwork that no one will ever read.

MAC, let's forget the puff and roll up our sleeves and get to work putting our Democracy back together and with it our educational system and our industrial infrasturcture. Excuses for failure just don't work in a global economy. When Wachovia Bank stole my house payments and rendered me homeless in a scam with State Farm, I fought that battle with everything I had and fought it alone for a long time. I was homeless and came within minutes of going to jail for treaspassing in my own house of 26 years. No one would help and when people said they were praying for me, I told them to forget the prayers and come out from the table they were hiding under and shake their fist at sanctioned criminal activity. When they took my house I told everyone who would listen that Wachovia was not going to take my home of 26 years and I had 5 gallons of gasoline and 8 tanks of propane to back it up (I still have them).

MAC, we live in a world of underachievers who think their only hope is to spend all day and night praying to God to stand in front of them and fight their battles and give them something for nothing. What a way to ensure that the world will always call you a loser. I tell people if they would be much better off to ask God to stand behind them and kick them in the ass every time they lose their purpose and get lazy. No doubt a portent of smashing success. Someone needs to advise GM and Ford that you can't walk on water and keep your head in the sand at the same time and if they ever decide on the proper prayers, the perfect target is right there for the kicking, all four ax handles wide.

Two choices MAC, a few more days with the mint juleps before the roof falls in or the challenge of a lifetime. You will know when you are doing right because it will hurt a lot but isn't that what a Free Enterprise Democracy is all about.

Mr. Pebble
My screensaver says "Never Surrender."