Mulally: It's the Suppliers, Stupid

Edward Niedermeyer
by Edward Niedermeyer

Ford CEO Alan Mulally, speaking at the Detroit Economic Club’s National Summit, expressed his concerns about the health of the auto industry’s supplier base. “The most important thing that we do now is help them consolidate because we have this overcapacity,” Mulally is quoted as saying in Automotive News [sub]. “Everybody is going to be really careful that we do that and that we don’t topple the supply base.” Too bad the White House doesn’t agree, and suppliers have been screwed over since the bailouts began. Mulally also admitted that US automakers have a long way to go in convincing Americans of the value of their businesses. “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.”

Edward Niedermeyer
Edward Niedermeyer

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  • PeteMoran PeteMoran on Jun 17, 2009
    There aren’t Ford suppliers. They all supply almost all automakers. A Dana or Lear or TRW or the like CH7 would bring down everybody. This continues to be the Siren's Song, but I believe it dramatically overstates what would happen. If those supply businesses, or their part lines are profitable, someone would step in to consolidate and restart supply. Downsized and restructed a reborn parts business might emerge. What's that lost, but favourite Americanism "Creative Destruction"? Disruption yes, complete cessation of supply not likely. I believe this is what Toyota and Honda have concluded and why they are near silent on the issue.
  • Guyincognito Guyincognito on Jun 18, 2009

    @ PeteMoran, I agree, the profitable parts lines would start up again under some consolidated supply network. However, the likelihood of someone re-organizing that business in the US is slim to nil. Labor and overhead make up [s]a[/s] the major cost for parts manufacturers. All of their other costs are basically fixed. Also, with the supply base consolidation and part commonization that even Detroit has begun to embrace, all major suppliers are deeply intertwined with the automakers. Sure the parts manufacturing will relocate to China, but then everything will have to be re-ppap'ed and proven out. This won't be a short process. I seriously doubt those with limited piles of cash, aka Ford, would survive the disruption. Toyota & Honda might make it though but they'll absorb some heavy losses.

  • WildBill WildBill on Jun 18, 2009

    I'm seeing lots of newer Fords on the roads around Central Ohio (Columbus area). Gives me some hope that they are getting the quality message through to the general public. The "dead cat bounce" from the ChryCo/Gov. Motors BK has to have helped as well. I'm looking forward to the new models in 2010/11, we'll be back in the market then.

  • Tricky Dicky Tricky Dicky on Jun 19, 2009

    @ P71_CrownVic Sorry to be a pedant, but Volvo asked the European Investment Bank for a €500M loan (as almost every other manufacturer with a location in Europe has made similar requests to the EIB, even companies like Nissan....) The EIB would not give a loan to any car company without a loan guarantee from a government. Volvo asked the Swedish Gov't to support them. They declined because they believed Volvo would fall into Chinese ownership and would that would undermine Swedish manufacturing and design. So Volvo asked the Flemish regional government in Belgium for a €300M guarantee (Belgium is the biggest producer of Volvos globally). As yet, Volvo has neither received a loan guarantee, or any loan from the EIB. And anyway, even if they did, they'd only be playing catch up with everyone else. What kind of capitalists would they be to turn down the possibility of cheaper rates of liquidity if it is available? I don't think you have grasped how commercial interests are ALWAYS shaped by government industrial policy, in the US, in Europe, in Asia. These are the competitive realitis in a global marketplace and in a low margins business such as car making, you have to take this into account. It DOES NOT invalidate your business credentials.