Ford to Pare Down to Low-Cost Producer : Autos: The company says it will keep total manufacturing cost per vehicle from rising for the next five years.
Ford Motor Co., facing increasing consumer resistance to rising vehicle prices, Monday set an ambitious goal of keeping total costs per vehicle at or below 1995 levels through 2000.
Jacques Nasser, Ford’s group vice president of product development, told the Automotive Press Assn. that the No. 2 car maker wants to shed its reputation for high product engineering costs and become the industry’s low-cost producer.
The cost-cutting goal does not mean that Ford also plans to freeze vehicle prices at 1995 levels, but Nasser said the initiative is partly a response to consumer sticker shock, which has put a dent in industry sales so far this year.
“Our projection is that there will be little flexibility in pricing going into the 21st Century,” he noted.
To reach the goal, Ford will have to reduce costs significantly so it can absorb both economic and inflationary cost increases, exchange rate changes and improvements to its product line.
“It’s a stretch objective, but it’s an objective that we think is appropriate,” Nasser said. “We feel that this is a fundamental strategy that we need to pursue.”
Nasser said Ford plans to reach its goal in part by reducing its $40 billion to $50 billion annual purchasing bill by 5% a year through 2000. He said the company will not simply demand price cuts from its suppliers, but plans to work with them to reduce their overall costs.
He also said Ford needs to improve its own internal product development efficiency by at least 50% compared to its level two years ago.
Ford’s reorganization of its North American and European car businesses into a single unit will help in its cost reduction efforts, but the full impact of the new “Ford 2000” structure will be realized starting in 1998.
The auto maker has said previously that it expects Ford 2000 to reduce its costs by $2 billion to $3 billion a year.
Nasser was put in charge of Ford’s global product development team with a mandate to cut costs. Previously, he slashed more than 10,000 jobs at Ford of Europe as chairman of that operation.
Ford has been sharply criticized by industry analysts for the staggering cost--about $6 billion--of its “World Car” program, which developed the Ford Mondeo for Europe and the Ford Contour and Mercury Mystique for North America.
Analysts also say that continuing high development costs are keeping Ford’s profits per vehicle lower than those of cross-town rival Chrysler Corp.
Nasser acknowledged that Chrysler has the lowest product development cost of the world’s major auto makers, but noted that he believes Ford still has lower manufacturing costs.
Ford’s stock closed up 25 cents to $26.75 Monday on the New York Stock Exchange.
