Ford drops car features to save cash, aid recovery
This belongs in Ford News, mods please move it there.
Detroit News
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DEARBORN -- Ford Motor Co., searching for ways to reduce expenses after losing $5.45 billion last year, is betting shoppers won't notice if it removes amenities such as rear seat ashtrays or map pockets behind the driver's seat.
The No. 2 automaker is planning to eliminate a number of features -- without hurting customer satisfaction or reducing quality -- from its vehicles beginning in the 2003 model year as part of a widespread campaign to cut product development costs as much as $2.5 billion.
The moves mark a radical change in philosophy at Ford. Under former Chief Executive Jacques Nasser, who was fired in October, 2001, Ford often loaded cars and trucks with features that didn't always pay off in fatter profits.
Ford outlined the strategy Tuesday for 125 securities analysts and The Detroit News. The briefings, at Ford's so-called total cost management center, were intended to reassure skeptical investors that the company's turnaround plan is on track. Wall Street has been concerned partly because Ford officials have acknowledged that product-development costs were still rising.
In addition to analyzing vehicle content, Ford also has assigned hundreds of engineers to search for ways to build vehicles more cheaply without sacrificing performance or durability, and it is working with suppliers to lower purchasing costs.
GM is also under orders from Vice-Chairman Bob Lutz to remove content and features that customers won't miss. The automaker did face some backlash after revealing earlier this year its decision to make anti-lock brakes optional on low-end cars.
The Chrysler unit of DaimlerChrysler AG is also seeking to cut costs by removing certain previously standard features, including tachometers on base-model minivans and roof racks on Jeep Grand Cherokees.
All of Ford's measures -- including supplier price concessions, engineering cost savings and elimination of costly features -- are intended to cut an average of $700 from the cost of every car, truck and minivan produced by 2005, said Jim Padilla, Ford's group vice president of Ford North America. "It's not going to be easy, but we are going to have to reach that goal," Padilla said. The cost-cutting campaign is part of a series of moves intended to boost the company's earnings by $9 billion by mid-decade.
The new Ford Expedition full-size sport-utility vehicle that is hitting showrooms this spring and the redesigned F-Series pickups, due out next year, are more expensive to build than the models they replaced.
"This is in sharp contrast to the 1999 redesign of the (General Motors Corp.) large pickups, which reduced costs by approximately $2,000 per unit," Prudential Securities analyst Michael Bruynesteyn wrote in a recent report.
The cost difference has allowed GM to offer buyers hefty rebates and still make a profit.
Ford senior managers now meet weekly for several hours to find ways to tackle bloated costs and pore over possible solutions. The practice of removing features to save money is particularly tricky: Ford and other automakers are trying to cut content without turning off customers or sacrificing safety.
Removing features backfired in 1997 when Ford stripped certain items from the popular Taurus sedan, only to see customers migrate to better-equipped Honda Accord and Toyota Camry models.
"We are not going to decontent the way we did in the mid-1990s, where it was very visible," said Phil Martens, Ford vice-president for vehicle programs.
Ford instead conducted extensive research with customers, said Bob Graziano, director of Ford North American product marketing, to determine which features were important to customers. Height-adjustable driver's seats and tow hooks, for example, proved very important to consumers while backseat ash trays and advanced air purifiers were less important.
Possibly more important to Ford's goal of cutting $700 a vehicle is a large-scale effort to find cheaper ways to engineer and build vehicles. In January, Ford assigned 300 engineers to work with suppliers to find cost savings. Buoyed by early successes, another 700 engineers were added to the team.
Ford offered several examples to securities analysts Tuesday.
In one case, Ford discovered that using an adhesive to mount the window on the sliding door of its Windstar minivan rather than securing the glass with 12 bolts could save $20 a vehicle or $15 million dollars a year.
Engineers also found that the foam padding on the roof of the Ford Crown Victoria, Mercury Grand Marquis and Lincoln Town Car could be replaced with a less expensive sheet of energy-absorbing plastic cones. The change will save Ford $32 million a year. "Think of it as bubble wrap for cars," Ford engineer Otis Spraw said.
Ford said dozens of these cost-saving projects are in the works. "You save a few pennies here and a few dollars there and it starts to add up," said John Kollar, an analyst with HSBC Securities. "They have to make sure, though, that this doesn't affect quality."<hr></blockquote>
[ 05-15-2002: Message edited by: raitchison ]</p>
