U.S. auto industry takes a stand
Ford and its suppliers draw closer
Partsmakers move near Torrence plant after its makeover
By James P. Miller
Tribune staff reporter
Published February 13, 2005
At its assembly plant on Chicago's South Side, Ford Motor Co. has taken the "just in time" supply arrangement to a new level: "Just up the street."
In August, Ford completed a $400 million makeover of the Torrence Avenue site, transforming it into what's known as a flex plant. At the same time, the company opened its first U.S. supplier park less than a half mile from the factory's gates.
The flexible-production plant and the clustering of suppliers nearby are aimed at reducing auto-factory operating costs. From that perspective, Ford's Chicago projects underscore the extent to which beleaguered U.S. automakers are pushing to become more efficient, as they struggle to stay competitive with nimbler offshore rivals.
Ford and rivals General Motors Corp. and Chrysler Group plan to spend billions of dollars to upgrade their North American vehicle-production facilities.
Among other things, making their plants more versatile allows the carmakers to consolidate production in fewer locations--and thus to save money by reducing their workforce.
Ford built the Torrence Avenue plant eight decades ago, when the Detroit company was struggling to keep up with demand for its Model T. That era was defined by Henry Ford's statement that consumers "can have any color [vehicle] they want, as long as it's black."
But with excess auto-production capacity holding down car prices, and with Asian and European carmakers relentlessly gaining U.S. market share, American automakers have abandoned that take-it-or-leave-it mind-set.
As Ford's push for efficiency and improved product quality gathers momentum, the Chicago plant--the world's oldest operating Ford factory--finds itself on the cutting edge of the industry's shake-up.
"Henry Ford's original production model, turning out the same car over and over again, won't work today," said a Ford spokeswoman. For each market segment, whether it is full-size, midsize or compact, "we need to make a bigger variety than in the past."
Outdated model
Like all of Ford's domestic plants, the Chicago plant had been geared to produce one specific model. That system works fine for turning out lots of units. Unfortunately, it also makes it difficult for carmakers to react to market changes.
When a model's popularity begins to fade, the factory that makes it must cut back on production. But when a plant's output drops below capacity, it becomes less efficient and less profitable.
Under the single-model-plant format, it is not unusual for one to be running at half capacity, while another plant that makes a popular model is unable to keep up with demand.
In that situation, Ford gets a double whammy, not only losing potential sales of the popular model because it can't produce enough units, but it's also obliged to put costly rebates or other sales incentives on the aging models to keep production volumes at acceptable levels.
At other times, carmakers keep volume up by selling faded models to fleet buyers, a practice that keeps the factory running but does nothing for profit.
Retooled as a flex plant, Ford's Chicago factory no longer is as vulnerable to such marketplace swings. It can make a total of eight vehicles off of two basic designs.
These days, the Chicago plant is producing three newly introduced models Ford hopes will appeal to U.S. car buyers. And because the production line can be switched easily from one model to another, the plant's output can be fine-tuned to produce whatever the market is calling for.
That capability allows flex plants to produce at near-capacity all the time and generates huge savings for carmakers.
Ford first converted its pickup truck plants to flex, but the Torrence Avenue assembly plant is the first car factory to get the costly revamping.
The plant, which had been one of two Ford factories making the Taurus model in the U.S., makes the all-new Ford Five Hundred, Ford Freestyle and Mercury Montego models.
Ford officials say the revamped plant is providing the operational advantages it was designed to yield. Asked whether the 2,600-worker Chicago plant has adjusted its output mix to reflect consumers' preferences, James Tetreault, the Detroit company's director of manufacturing, declined to provide specifics. But, he added, "that plant is very enabled to respond to the marketplace in a short time."
Faster response time is also at the center of the second forward-looking element at Ford's South Side plant: the Chicago Manufacturing Campus.
The flexible-assembly plant, by definition, uses a wider variety of components than does a plant that makes a single model. That was one reason why, when Ford was remaking its Chicago factory, the company opted to shorten its supply chain by constructing a 155-acre supplier park nearby.
In four buildings that boast a total of 1.5 million square feet of floor space, a dozen Ford suppliers have established operations.
At the campus, 1,400 employees of such companies as Lear Corp. and Visteon Corp. make door systems, bumpers, engine mounts, fuel-tank assemblies and a host of other components that the assembly plant requires.
Transportation costs cut
In the past, those parts were sent in by truck, often from supplier plants hundreds of miles away. Now, trucks shuttle back and forth all day long between the supplier park and the nearby Ford plant. In some cases, parts are being put into vehicles in the assembly plant just 90 minutes after being produced in the supplier campus.
The arrangement is "the ultimate example of the application of lean manufacturing concepts," said Lear Chief Executive Bob Rossiter when the facility opened in August.
For Ford, the advantages of clustering the suppliers outside the factory walls are unambiguous. The proximity has lowered Ford's trucking costs by a "significant" amount, said James Tetreault, the Detroit company's director of manufacturing.
But the bigger advantages are operational, he said, because any potential problems with parts show up promptly and can get fixed sooner than in the past.
"It's response time," said Tetreault. "We control the quality with only limited material in the pipeline." Ford also saves because it needn't keep large inventories of parts.
For its suppliers, however, the benefits of the campus arrangement, beyond the plant-specific sales, are murkier.
"It isn't real clear what the advantages are for the supplier, except to keep Ford happy," said Erich Merkle, automotive analyst with Grand Rapids Mich.-based consultant IRN Inc.
The campus supplies parts that represent 60 percent of value of the vehicle.
From a supplier's perspective, Merkle said, establishment of the campus at Chicago can be seen as obliging partsmakers to expend capital and expand capacity at a time when their volumes are coming down.
In a sense, Merkle said, having the suppliers tie their fortunes to a specific Ford plant "is placing more of the risk with the supplier."
For suppliers with close links to Ford, "you're going to do what you can to support them. But if you have a more diversified customer base, you may be less likely to take them up on their offer," he said.
As U.S. automakers have struggled to reduce their costs, suppliers have paid their dues, observers note.
Carmakers "can't take any more costs out of the supplier side," said David Cole, chairman of the Center for Automotive Research. "They've already cut [those providers] down to skin and bones."> |
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