For parts suppliers, the bad news in Ford Motor Co.'s stern new North American reorganization plan is that stress levels will be cranked up a notch or two.
In addition to plant closings and job layoffs, Ford's Way Forward plan, announced last week, will seek $6 billion in material cost reductions over the next five years. That target represents almost 7 percent of Ford's $90 billion global budget for parts, materials and tools.
"This is all going to come out of the hides of suppliers," predicts John Murphy, senior auto industry analyst with Merrill Lynch & Co. in New York. "They'll be lucky to get there by 2010."
Now the good news. Unlike previous supplier cost-reduction programs, Ford will rely on a critical new tool this time: a collaborative supplier program it unveiled last September to reward its supply chain for bringing down production costs globally.
That earlier program, dubbed the "Aligned Business Framework," is designed to tap into supplier ideas for cost savings during vehicle design projects. It also seeks to spread supplier costs over longer periods and more models. Another goal is to winnow Ford's worldwide supplier ranks to give fewer companies more business.
Those moves were taken in preparation for last week's restructuring plan.
"The Aligned Business Framework wasn't done without knowledge of the new plan," says Paul Wood, spokesman for Ford's purchasing operations. "When you look at the Way Forward plan, you'll see language that's similar to what's in the framework."