Ford to pare down suppliers by 40 percent

Long-term goal set to reduce cost of building cars, trucks

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DEARBORN, Mich. — Ford, the U.S. automaker that purchases about $100 billion worth of parts annually, plans to reduce its roster of suppliers by 40 percent to cut the cost of building its cars and trucks.

Ford's long-term goal is to buy parts from about 750 suppliers, from 1,260 last year, said Hau Thai-Tang, who became group vice president of global purchasing in August. The second- largest U.S. automaker is reducing the number of platforms that serve as the base of its vehicles, paring development costs and enabling the company to source from fewer suppliers.

"We still think that there's plenty of opportunities for us to get down to the 750 number and still have plenty of competition and allow us to get the best ideas from the most innovative suppliers," Thai-Tang told reporters Monday at a briefing here where Ford is based.

Chief Executive Officer Alan Mulally, 68, has boosted profitability at Ford by reducing the number of its vehicle platforms to 14 today, from 27 in 2007, his first full year with the company. Ford's lineup will slim down further to nine platforms by 2017, Thai-Tang said.

Savings from consolidating its platforms has boosted profit margins and enables the company to introduce new and refreshed cars and trucks more frequently. The company earned $35.2 billion from 2009 through 2012 after losing $30.1 billion in the previous three years.

Ford buys about 80 percent of its parts from its largest 100 suppliers and about 60 percent from its 65 biggest parts makers, said Thai-Tang, 47.

"We want a long-term strategic partnership with key suppliers, and by doing that, we'll get better business results for the two of us," he said.

Automakers and their suppliers are facing capacity constraints as production increases to meet rising demand, said Thai-Tang, who was vice president of engineering before his promotion to his current post. U.S. sales of cars and light trucks are on pace for the best year since 2007.

"Everyone is running flat-out," he said. "We're a lot more exposed in terms of any production issues because you just can't recover."

The constraints are contributing to problems Ford has had with quality, Thai-Tang said. Ford's first-half quality metrics were mixed, and it downgraded its internal forecast for results to improve for the full year after the second quarter.

Consolidation of the supply base through mergers and acquisitions has been limited, Thai-Tang said. Ford shares have climbed 35 percent this year compared with a 22 percent rise in the Standard & Poor's 500 Index.