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Ford to Halve Number of Suppliers to Reduce Costs

From Reuters

Ford Motor Co. said Thursday that it would cut its suppliers by about half and award key parts makers larger, long-term contracts in a move to reduce costs globally and stem losses in North America.

Ford -- which buys about $90 billion of parts, goods and services a year worldwide -- already has chosen seven companies as initial suppliers.

They are Autoliv Inc. of Sweden, Delphi Corp., Johnson Controls Inc., Visteon Corp. and Lear Corp. of the United States, Canada’s Magna International Inc., and Yazaki Corp. of Japan.

Other suppliers in the initiative, which promises to simplify a complex and expensive network, will be named later, said the No. 2 U.S. automaker, which currently has about 2,500 suppliers.

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Analysts noted that Ford stood to benefit from improved quality and better contract terms. Ford, however, declined to detail the specifics of the expected savings. The company’s purchasing chief, Tony Brown, said the new plan would have a “significant impact” on costs.

In the plan’s first phase, Ford said it expected to reduce by about half the number of suppliers from which it sources new business for 20 key parts and commodities. They include seats, wiring, restraint systems and instrument and trim panels -- components that represent about 50% of Ford’s global production purchases annually.

Ford also said it expected suppliers to be involved in the design and production process, cutting the time and costs of bringing a vehicle to market.


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