Jac Nasser, CEO of Ford Motor Co., says the parts business remains financially attractive, particularly if suppliers concentrate on systems and modules. Suppliers also need to pursue ideas to cut weight and provide more value to customers, he says.
Nasser was interviewed Oct. 25 by Executive Editor Peter Brown, Editor Edward Lapham and Staff Reporter Mary Connelly.
For more of Nasser's views, see the edited transcript on Page 25, part of Automotive News' Talk from the Top interviews with global CEOs.
With suppliers, you are asking for 3 percent to 6 percent price cuts. Supplier stocks are already lower than anything at the bottom of the sea. Is there a fear that someday that whole business model becomes a loser because they can't get the capital to invest to support research and development and future products?
I don't think so. Suppliers are not weak financially because of the base business. A lot of suppliers made large acquisitions, and they are in the process of digesting those acquisitions. The fundamental supply business is still very attractive.
I would argue that if I were in the supply business I wouldn't want to be in the commodity generic business. I would want to be in added value. I would want to do my own research and technology. I would want to get out of components and into systems, modules and subsystems.
The strategy for the suppliers is right. I firmly believe it will result in better value for the suppliers.
While that is going on, the market is tough and consumers are demanding better value. And they should. The supply base, because it represents such a big percentage of our overall cost base, 3 to 6 percent is a drop in the bucket. Think of the new technology out there, the consolidation that is going on in the industry, the fact that we are at record volume levels. There are opportunities in terms of the new, different products coming out. That is the least we should be looking for.
So the sector won't dry up because of the marketplace pressures?
I don't think so. There is always a check and balance that goes on. It is such a large industry. It is such a complex industry. It touches everything. You are touching very simple fastener components all the way to sophisticated airbag technology.
I was talking to a supplier yesterday on fuel tanks. The reaction I got was, 'We just make fuel tanks.' I said, 'If you think you are in the business of bending sheet metal to make fuel tanks, then you are going to end with bending-sheet-metal markets. Why don't you think of it differently? What can you do to differentiate yourself, to offer customers a better value? Can you make a more space efficient fuel tank so you get better fuel range through the shape of the tank? Can you make it lighter weight?' No matter what component you are in, there is an opportunity to think differently about that element of the product.
Environmental leadership and new technologies: Is this one area where you need to be first? You weren't the first with hybrids or first with fuel cells.
You have to place your bets in certain areas. You have to be present in almost all those technologies because you are not sure which one will win. By the way, I don't think any one technology will win, only because there are different lifestyles and different life stages.
You have to place your bets on almost all of the technologies. But you can't win in every technology. So we have placed our bets on electric, on fuel cells, on hybrid vehicles. You have to be present in all of those. I also believe that there are tremendous efficiencies left in the internal-combustion engine. I am talking substantial improvements. It doesn't necessarily have to be gasoline fueled or even diesel fueled. We could be talking about hydrogen or something else.
All of these different propulsion systems and new technologies will be valid as far out as we plan. I am talking about a 10- to 15-year time span. Beyond that, who knows?
Who does this resonate with demographically or geographically?
It is a competitive advantage, because we fundamentally believe that is where the market will be in 10 to 15 years. You need to get the technology base established now. None of these technologies will be viable unless you have economies of scale. You won't get economies of scale and the affordability equation resolved unless we start investing in the research now. In many cases, like fuel cells, the risks are so high there is so much invention to be done that we share it with DaimlerChrysler and Ballard. In other areas we will go it alone.
When I talk about customer satisfaction and responding to the marketplace, it is a futuring. It is saying this is where we think it is going to be. Not every one of those bets will work. But most will in some way or another.
Are you going to start making substantial numbers of Mazdas in Europe? If Mazda wants to be significant in Europe, you are going to have to put some more Mazdas in your plants.
When you look at the European market and the currency swings and what competitive Japanese brands are doing in Europe, it is inevitable that Mazda is more represented in terms of manufacturing capability in Europe. It is a question of how much and with what product. Those questions are being addressed.
Are you close to decisions?
Probably months away. To me it is a very clear question. Do you want Mazda to grow in Europe, or are you satisfied with the status quo? If you want Mazda to grow in Europe, it is inevitable that you have a greater European presence.
Is there any other place in the world where you are re-evaluating your portfolio of brands and what Ford needs in a particular market?
I would say everywhere mostly because Jaguar is growing into segments they haven't been in traditionally. Two, Volvo Cars is a recent acquisition, and Land Rover is an even more recent acquisition. There is potential for those brands. One of the reasons we bought them is we thought they were great brands with even further potential. So we are trying to fit in what is the best way of doing that.
Asia is a good example. The traditional approach in Asia would be find some partners, invest a lot of money and hope for the best, because there are a lot of people, and one of these days they are going to buy a lot of cars.
Our view is Asia is important. We have got some manufacturing capability there.
We have got a great partner in Japan with Mazda. We would like to do more in China. There is a great middle class in the Asian market. There is a tremendous level of global communication now so people everywhere know about every product, every brand. The Asian middle class is extremely brand conscious and brand aware. Why not develop the Premier Automotive Group brands - for example, Volvo - in the Asian markets?
Will your dealers warranty tires?
The warranty on tires is a red herring. It doesn't mean a darn thing. Warranty on tires, do you know what it is? It's scuff marks. It is letters that are not very clear. It is minor damage. That tells you almost nothing. And the warranty on tires is very, very low. So when you hear others say, 'We have the warranty on tires,' that is meaningless data. It is noise level. You need a comprehensive data input from customers that includes warranty, claims data, vehicle damage data, personal injury data, legal suits, everything. That is what we are initiating as an industry.
It looks like one of your Q1 suppliers sold you some bad product, the recalled Firestone tires. How will you change the Q1 process or purchasing as a result?
Q1 is a process. It isn't a quality inspection test. There is a question of trust with Q1. I am not about to go and tell a tire company how to make tires. You can't inspect one of these tires and say it is good or bad. You've got to choose the best suppliers, and Firestone had a tremendous record for millions of tires. But not these tires. We can come up with all the highfalutin-sounding quality awards and inspections. But it has got to be on the shop floor, robust production and inspection stage by stage as the product is being built.