DETROIT-Ford Motor Co. and General Motors Corp. are setting rigorous new targets for price cuts by their parts suppliers.
Ford executives told 100 of its top suppliers that their prices must eventually match those of their lowest-cost rivals, including those based in such countries as China. Ford expects 3.5 percent price cuts by Jan. 1, 2004, with more cuts to follow. For the full year, Ford wants its suppliers to come up with design cost savings of 20 percent of 2003 levels, which suppliers are expected to achieve by re-engineering components, finding less costly materials or coming up with simpler designs.
General Motors has told suppliers that to retain its business, a supplier will have 30 days to come up with corrective measures if its price is higher than that of a rival's. "[The demand is designed] to boost our ability to work with suppliers to keep them competitive. ...Our intent is not to change suppliers. That doesn't do us any good," says Pat Morrissey, a spokesman for General Motors.
The moves underscore the growing globalization of the auto industry, as auto parts and entire vehicles increasingly flow across borders.