Thursday, September 29, 2005

Ford will pare down suppliers in attempt to cut costs

By Dee-Ann Durbin / Associated Press

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DETROIT -- Ford Motor Co. said Thursday it plans to pare down the number of suppliers it uses and give them larger, longer-term contracts in an effort to cut costs.

Ford said it will use the new system for vehicles built in 2008 and beyond. The Dearborn-based automaker eventually wants to cut the number of suppliers it uses from 2,500 to 1,000.

Ford's annual purchasing bill is $90 billion, spokesman Paul Wood said. That includes $70 billion for parts that go directly into vehicles.

The automaker was scheduled to provide additional details of the program later Thursday.

Ford has been struggling with declining U.S. market share and increases in the price of steel and other raw materials. The Dearborn-based automaker reported a pretax loss of $907 million in the second quarter, after a $454 million profit in the year ago period.

Ford is following DaimlerChrysler AG's Chrysler Group and General Motors Corp., which have recently announced similar changes in order to improve relationships with suppliers and cut costs.

GM said last week it plans to work with fewer suppliers and will set cost-cutting targets for individual parts rather than asking suppliers to meet corporate cost-cutting goals. GM's program will affect around 300 of its top suppliers. The world's largest automaker works with 3,200 suppliers and buys $85 billion in parts each year.

Chrysler said last month that it has begun rewarding its highest-performing suppliers with longer-term contracts and the first opportunity to bid for new business.

Ford shares were down 2 cents to $9.93 in morning trading on the New York Stock Exchange.