DETROIT - With its new executive team in place, battered Federal-Mogul Corp. plans a cost-cutting effort that will slash the ranks of its 30,000 suppliers.
CEO Frank Macher said he must act quickly to improve profitability and cash flow. The world's largest supplier of engine seals and bearings is under pressure from slumping volume from the decline in light-vehicle production by his Big 3 customers, a declining aftermarket and slumping big-truck market, and is on the hook for $900 million in payouts for asbestos claims through 2004.
'There is so little time,' Macher told employees gathered for his introduction at the company's headquarters on Thursday, Jan. 11. 'We are in a downturn and are facing high costs.'
Federal-Mogul's board appointed Macher as CEO effective Jan. 11. He once headed Ford Motor Co.'s parts group, the predecessor to Visteon Corp.
Named as the No. 2 executive is Chip McClure, 47, who resigned as president and CEO of engine maker Detroit Diesel Corp. He becomes COO.
Macher, who is Federal-Mogul's third CEO in five years, said one of his plans would be to cut his supply base of 30,000 companies. Asked for an ideal size, he said, 'Is 3,000 too many?'
Macher said he would ask his suppliers for price cuts because Federal-Mogul's operating margins are under pressure from cost cuts sought by General Motors, Ford and DaimlerChrysler, but he did not elaborate.
He also said he will consolidate Federal-Mogul's 150 plants and 46 engineering centers but did not provide details.
Federal-Mogul needs to raise cash, and Macher said the company is again looking at asset sales. Efforts last year to sell its lighting, wiper-blade and fuel systems units failed.
Macher is the first Federal-Mogul CEO in more than a decade to have an operations background. He held a variety of manufacturing, engineering and quality jobs at Ford before joining ITT Automotive as president and CEO in July 1997. The ITT business was sold in early 1999.
Macher succeeds Steve Miller, Federal-Mogul's interim CEO, and become executive chairman of the board in July 2002. Miller will continue as a board member.
At that time, McClure will succeed Macher as CEO and president.