Another Reason Ford is Losing

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Aside from Ford's obvious problem of the United Auto Workers' driving labor costs above their natural level, the company is also shooting itself in the foot fighting against foreign replacement parts manufacturers (Washington Post, Tuesday, August 21, 2007; Page D01).

Now, at first glance, one would think that protecting one's patents would be a good thing. It is, up to a point. That point is that Ford wants to be the sole supplier of replacement parts. The problem is that other, foreign manufacturers can make identical parts cheaper than Ford can. By attempting to drive such manufacturers out of the market, Ford will only drive up the cost of those parts. The result is that the cost of ownership goes up. When the cost of ownership goes up, fewer people buy Fords.

Ford should consider licensing such manufacturers, with the licensing fee's going directly to pay for quality inspections of the parts. Although this would increase the cost of such replacement parts, the manufacturers could advertise that the parts are licenced and inspected by Ford, and the competition would keep the prices down.

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5 Comments

ACTivist said:

The cost of ownership has always been an issue. Automobile manufacturers make there money on parts. It is estimated that a vehicle costs 4 times the original amount if built from scratch with parts. If foreign manufacturers are suppling parts at half of what Ford can, the parts are still twice as much.

The problem I have found with foreign manufacturers (copycats) is the allowances and tolerances used in their parts, as well as the material. They are a cheaper made product with good reason. They have to create forms and dies like the original manufacturer. Most have poor quality control and can be dangerous depending on their usage. Ford could have auxillary parts manufacturers (foreign) under stringent quality control (as you suggest) to off-set the competition and pricing and still come out winning.

The automotive pie is too big and the major players are too greedy. In the end, as always, the consumer pays the price in all associated industries. The most prudent course of action would leave model styling (commonality) in longer runs which would greatly defer costs (from constant model design and change) and/or durability in parts which would in turn increase sales. Neither of these suggestions will ever happen and the attrition rate of newer automobiles will only add to the enormous cost of doing business in the future.

Jack said:

ACTivist, I do not know for certain, but I doubt Ford itself makes most of the parts that go into its vehicles. I suspect that they are designed by Ford, but the actual manufacture of the parts is contracted out. The market for replacement parts is considerably smaller, thus the manufacturers of replacement parts, if not the original manufacturer, will be at a competitive disadvantage simply on the lot size. Furthermore, transportation costs are higher for replacement parts, because they have to go to thousands of parts stores not a few factories.

I do not think it is simply a matter of greed. The ultimate purpose of any for-profit company is to make a profit for its owners. I think the problem is short-sightedness. They think that cornering the replacement-parts market will increase the bottom line, when it may lose more in vehicle sales than it gains in replacement part sales.

ACTivist said:

Jack, you will find that there are some major parts manufacturers here in the U.S. as well as abroad. Granted they may have transportation costs involved but they will always be able to undercut the "major motors" on pricing. The glich is two-fold. First, only common parts (if I can use that discriptor) are found at your local parts store. Most major parts (model specific) can only be gotten at the dealer. There is one corner on the market. Secondly, when you look at warrenties, one of the best ways to null-and-void is to use an aftermarket part and have it cause a failure. That is why they only recommend genuine parts because they can't and won't fix something that isn't of their name (even oils need to meet specs and can end up being a deal breaker if an engine fails).

Again, there is always that planned obsolesence thing that helps make profit. Remember the Japanese transistor radios of the early 60's? How about the Japanese electronics of today? Their cars as well as other Asian automobiles are built more durable and BACKED by their warrentees. Could Ford or any others do that? They could but they won't. I'm a Ford man but when my extended warrentee runs out on this vehicle it's one major breakdown and I will already be well on the road to a new vehicle just due to repair costs.

If you want that profit you have to satisfy the customer. It appears, as with other American industry, that they are more worried about todays dollars than tomorrows customers. Japanese have proved that time and again. Times have changed. Ford needs to back-up to what used to work.

Dan said:

Worrying about today's dollars is the American busniess model. Worry about the next quarter rather than the next decade... Maybe if we too had listened to Deming we might be doing it right today..

But, I have to say that cheap auto parts are nothing more than cheap auto parts. I believe that Ford already builds engines and other subassemblies in Mexico, and some also built by Volvo. When I purchased my last vehicle, I read a report somewhere, maybe Edmunds, that claimed that in many cases, some vehicles made by Japanese manufacturers contained more American made parts than some of the Big 3.

Had Enough said:

Ford has no problem pouring money into "La Raza (The Race),GMC included.

Ford and GMC, financial troubles, layoffs, Benefit cuts, but they still have funds for "The Race."

I read that Miller Brewing financed "The March" last year.

Suppporting these companies is supporting the groups that aid Illegals.

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