Carlos Mazzorin is a human lightning rod. And no wonder: Ford Motor Co.'s purchasing boss pushes suppliers for better quality and lower costs as the automaker undergoes wrenching, worldwide changes in the way it produces vehicles. But in Mazzorin's view, the stakes are nothing less than survival. And he wants Ford to be among the fittest. One sign: Ford last year pulled its internal Q1 quality ranking from 44 supplier plants that Ford said had slipped.
On May 7, Mazzorin was interviewed by Staff Reporter David Sedgwick and Managing Editor David Versical in Dearborn, Mich. Excerpts:
How many first-tier suppliers do you have, and how many do you expect to cut?
It keeps changing. But I can give you a pretty good number when I say that 250 suppliers account for the high end of the buy. That does not mean all the rest can be eliminated.
You can't have a plan that simply says, 'Cut the number of suppliers.' For a while we did that, because we did have too many. But now we are adding suppliers globally, in places like India and China. Second, I want my buyers to be always alert for new technology. You can never be sure who will produce a new invention for you.
Who is the new Apple? Who is the new Intel? Who is the new Federal Express? You cannot say that what we have today will always be here. I don't want to spend all my time improving the telegraph when the fax machine is about to be invented.
But how do you make sure that you get access to the best technology?
This is a $1 trillion industry. It's a big industry! Everybody wants to get in on it. People are going to knock on your door and tell you they have a new way to do things, because there is money to be made. I expect the bright new ideas will come.
How much has the quality of your suppliers' parts improved?
We had a significant improvement on the J.D. Power initial quality survey. We have said we want to reduce defects per million parts by 25 percent, year over year. The average reduction has been 36 percent. The improvement on the Power survey has been more than dramatic.
How did your suppliers improve so quickly?
Our average defects per million parts can be distorted by a few suppliers that have high numbers.
First, we took a quarter of those cases, reviewed them, and removed their Q1 ratings. We canceled contracts with suppliers that had consistently poor quality.
Second, we did not buy parts from supplier plants that did not have a Q1 rating.
Third, some suppliers were put on Q1 probation.
Fourth, suppliers that did not deliver parts at least 85 percent on time were put on probation.
We meet with suppliers three times a year, 20 at a time. We said, 'If we do not see an improvement, we will not place any new business with them.' How many suppliers can beat your goal of 60 defects per million parts?
I can tell you there are approximately 500 supplier plants that deliver zero defects per million. Suppliers to 70 percent of our plants are under 500 defects per million. But we cannot declare victory. We have a long way to go, but the trends are good. This year, we are seeing the same trend as in 1996. We are improving at the same double-digit rate.
How many suppliers on probation lost the business?
A large portion got it back. The ones that didn't, we have re-sourced the business.
How many plants were put on the Q1 watch list this year?
It's not a humongous number. About 160 to 200 (supplier plants) were put on probation since we began the program.
We all talk about how difficult it is to cut costs and eliminate waste. The easiest way to do that is improve quality.
GM and Chrysler are trying to cut warranty costs by giving suppliers instant access to dealers' repair data. Will Ford do that, too?
We and the suppliers have to address warranty issues in a simultaneous process. We are giving suppliers access to our dealers' customer service departments. The warranty data will be very shortly online.
Are you cutting material costs 5 percent annually, as planned?
We are getting there. I would call it another success story.
Were your 1996 costs below 1995's?
They were marginally lower.
Will 1998's costs be less than 1997's?
It has to be. It's a matter of survival. We are getting good at this. I am extremely optimistic.
What percentage of your contracts use target pricing, where you tell suppliers what you will pay and they must meet the goal?
Under Ford 2000, we set price targets for all new programs.
We do a small number of competitive bids for new technology. Let's say you have a new engine management system, with different approaches to do it. One supplier says, 'This is what I will do,' and another supplier says, 'This is what I will do for you.'
How quickly are you ramping up your program to have 'full-service' suppliers design components as well as build them?
It's going very well. We went from zero to 160 full-service suppliers in 18 months. When we get to 250 suppliers, we will have a lot of the volume.
What is your stance on the wave of mergers among suppliers?
They have to run their business. The suppliers have to decide how to get a return for their shareholders. And they have to decide how to satisfy our needs. I don't look at consolidation as a threat to Ford.
Do you ask for consultations before suppliers buy or sell another company?
... It is up to them if they want to discuss it or not. But if you are selling your Ford business - if it becomes the pawn in the negotiations - we would like to be part of it. If you are a 100 percent supplier to Ford, and if you are selling the business to someone else, you owe it as a courtesy to Ford.
Goodyear is negotiating to sell its instrument panel business to Lear Corp. Has Goodyear consulted with you on this?
I don't want to comment on that. But if you are buying a supplier that is a major supplier to us, you will have the courtesy to call us. They always call us. We always talk. We always discuss. We always strategize.
Did you encourage Breed Technologies to buy United Technologies' steering wheel business? That was a situation where a major Ford supplier knew it would have to bail out of a product segment.
We had very candid conversations on that. We talked about where we saw the industry was going, what's happening with airbags and where that business would fit.
United Technologies told us that they sold because they knew that you wanted them to ship their steering wheels with the airbags already installed. But they didn't make airbags, and they couldn't afford to get into that business.
The purpose is to avoid making your business obsolete. We have a responsibility not to let you just sit there, when we know that five or six years from now you will be obsolete.
Do you ever play matchmaker for suppliers who want to merge?
We are brokers. We get this company and that company together. We say this might be a good product fit, or management fit. I tell them, 'I think you should get together.' Whether they do it or not is a different story. But we play a big role on that.
Some suppliers say Ford is the toughest company to deal with because it's inconsistent.
I meet with suppliers three times a year, 20 at a time. We have a dialogue. Could things be better? Absolutely. We reinvented the company virtually overnight. We set up five vehicle centers. Then we set up three vehicle centers, which created more movement among our purchasers. When you create more movement, it's like losing your address book. Everything becomes more complicated.
We have grown. We told our suppliers: We want to go to India; we want to go to China; we want to go to Brazil. And we want our suppliers to follow us. It's a headache.
Now we are entering a period of stability. We are concentrating on the process.
During the UAW strike against Johnson Controls, suppliers were upset when Ford refused to accept seats produced by non-union workers. Is this the start of a trend?
We will not pressure our suppliers to accept the UAW.
We will let them know our views. We will advise our suppliers of the value of our cooperative relations with the UAW. But it is the supplier's decision how to deal with the union. It is up to the suppliers.