Suppliers' health now industry's top concern, Mulally says

Chrissie Thompson, Automotive News

Detroit, Michigan -- The health of the supply base is now the US auto industry's top concern, Ford Motor Co. CEO Alan Mulally said today.

"The most important thing that we do now is help them consolidate because we have this overcapacity," Mulally said, speaking after the National Summit, a forum sponsored by the Detroit Economic Club.

"Everybody is going to be really careful that we do that and that we don't topple the supply base," he said, adding that Ford is working with other automakers who share their suppliers.

The US presidential auto task force has denied suppliers' requests for $8 billion to $10 billion in additional federal aid.

Ford also is seeking more concessions from the CAW and the UAW, which agreed to new terms as prefaces to Chrysler LLC's and General Motors' bankruptcies. A no-strike clause through 2015, like that in Chrysler's UAW agreement, is part of the negotiations, Mulally said.

During a panel on innovation and competitiveness in manufacturing, Mulally said companies need to "make it cool to be in business again.

"Some things have happened, disappointed a lot of people, but we've got to really polish the value of what business brings to mankind," he said. "We're fighting for the soul of design and manufacturing in the United States."

Part of the solution, Mulally said, is allowing cross-discipline innovation around a compelling vision. When he joined Ford in 2006 as CEO, "I've never seen a company that has more talent around the world … but they were all working separately," he said. "When we pulled together and decided we were going to focus on the Ford brand … it just set Ford free."

Unlike Detroit competitors Chrysler and GM, Ford has not taken federal aid.

"We have sized ourself so that we are competitive. We can be profitable," Mulally said after the panel discussion. "We have the liquidity to implement our plan."

Ford plans to reach profitability in 2011, he said. Ford Motor posted a record net loss of $14.7 billion in 2008 and a first-quarter net loss of $1.43 billion. It burned through $3.7 billion in cash during the first quarter, less than the $7.2 billion cash it burned in the fourth quarter of 2008.

Overall cash at the end of the first quarter grew by $7.9 billion, to $21.3 billion, largely because Ford drew down a $10.1 billion line of credit in the first quarter. The company has since raised $1.4 billion through a share offer.

During the panel discussion, Mulally said the United States can encourage innovation by streamlining regulation. He said the country needs more bureaucratic harmonization, such as the Obama administration's recent creation of a single fuel-efficiency standard instead of separate EPA and Department of Transportation rules.

And U.S. schools and colleges need to teach students to work together. Said Mulally: "If you collaborate before you graduate, they call it cheating usually."

From Automotive News (A Crain publication)