Global Insight Perspective | |
Significance | Ford has announced a major initiative to better integrate global product development under Derrick Kuzak and global purchasing under Tom Brown, ostensibly in the hope of speeding products to market. |
Implications | Under the new structure, Ford will assign various components, systems, and platforms to its North American, European, and Asia-Pacific design centres, with regional purchasing and development centres supporting the main ones. |
Outlook | The idea is remarkably similar to the “Ford 2000” plan over a decade ago, but with the communication tools and information technology of the 21st century, Ford's chances of pulling off such a feat are better today. The biggest challenge will be time—Ford is behind its competitors in the globalisation process, and it needs to act very quickly. |
Ford has announced sweeping organisational changes to its global product development and purchasing departments, similar to the changes made by global product development czar Derrick Kuzak at Ford of Europe and Ford North America over the past several years. "This is all about 'One Ford'. This is the final step in that process", said Derrick Kuzak, Ford's global product development chief, in an interview with the Detroit News. "The aim is to improve the simplicity of our organization, which allows us to drive better efficiency, better costs and better quality for our customers." The move assigns global centres for engineering of specific platforms, and reshuffles engineers to simplify the organisation and speed new products to market. Kuzak began work on integrating product development globally in 2006, but this marks the next step in integrating the product development side with the purchasing organisation under group Vice-President Tom Brown. “Better alignment of our resources not only helps Ford—it will also improve the way we do business with our global supply base by simplifying our sourcing process”, Brown said in a statement released by Ford. "This is consistent with the principles of our Aligned Business Framework, which is strengthening collaboration with our key suppliers", he added.
Various regional units within the Ford group will be given responsibility and assignments for component and platform development, forming global engineering and purchasing centres. North America has been designated responsibility for body interiors, exteriors, electrical systems, automatic transmissions, and V-6, V-8, and hybrid powertrains. The European centre will be responsible for the development and purchasing of all 4-cylinder engines, chassis development, diesel powertrains, and manual transmissions. Global product teams will also be assigned vehicle segments as well, such as small, mid-size, and large cars. Three regional engineering and purchasing centres will support the North American and European operations, with the Asia-Pacific and Africa (APA), Australia, and South America regional centres still supporting the major design centres while also taking care of regional requirements for those markets.
Not all vehicles will fall under the new platform designations, however. Ford says that regionally specialised vehicles such as the Ford F-Series full-size pick-ups will be covered in North America, and the company's global effort for compact pick-up development will be concentrated at the APA centre. “This is a crucial part of the plan that we started more than a year ago”, said Alan Mulally, Ford president and chief executive officer (CEO). “We need product development and purchasing organizations that are aligned on a global scale. This is an important step in fostering a ‘One Ford’ approach that leverages our global resources and expertise”, he added.
Outlook and Implications
Ford has tried this approach before, almost exactly a decade ago, with the “Ford 2000” scheme hatched under then-CEO Alex Trotman circa 1995. That effort produced significant cost savings, but caused extreme disruption to the company organisationally, and most of the resulting products were not well received in the markets in which they were not developed. The European Mondeo was developed in Europe but was sold in North America as the Ford Contour, but it was both too small and too expensive to compete properly, and was less than successful. The Ford Transit van was redesigned in the United States at first (which was designated the global truck centre), but the sheer foreignness of the vehicle's requirements led to development being sent back to Europe in the later stages. Pretty much the only successful model to have come out of the “Ford 2000” initiative was the original Ford Focus, which was a commercial success in both Europe and North America.
A decade later, and Ford is facing a test of survival. All of the major global automakers are truly global in their scope, led by Toyota and General Motors (GM), in terms of their full utilisation of global development centres to successfully produce vehicles for global markets. Can Ford make a go of globalisation again, assigning platforms and component development to its various regions of expertise? The answer is: maybe. Several factors will have to come together for Ford to truly make the best use of a globally integrated product and purchasing process. First, the individual "many Fords" must be swept away entirely; no more fiefdoms can operate independently, concerned primarily with their own backyards and the vehicles they intend to sell there. Mulally has thus far done a good job in trying to eliminate that attitude, but whether or not that has been fully accomplished is yet to be seen. Some indications that not all of the players are on the same page is evident in the styling differences between Ford of Europe's products and Ford North America's products. The design aesthetic being applied in Europe is vastly different to the one seen in North America, suggesting that the designers are not quite working together. However, the latest concepts and products, such as the redesigned Fiesta “world car” seen at all of the world's major motor shows, indicate that this last vestige of regionalism may finally have been banished.
Secondly, Ford needs to maximise its ability to foster communication between its far-flung operations. The “Ford 2000” strategy did not benefit from the same kind of instant electronic communication, massive file-sharing, and virtual tele-presence technology that the world's top companies currently employ in areas such as design and development. Derrick Kuzak has spent the last year integrating the various design and development departments globally; if this kind of streamlined technology can be successfully employed, then a major barrier to creating such a global organisation will have been overcome.
Finally, engineers in all regions must be intimately familiar with the requirements and tastes of the customers for which they are creating vehicles. Many of the “Ford 2000” initiatives did not work because of the inflexibility of the platforms Ford employed at the time; the Contour was not big enough for American tastes, but the mid-size Taurus would have been inappropriate for the European market. Now, with Asia a bigger potential market than either the United States or Europe, and growing daily, a third region needs to be considered. In the past decade, Ford, its Volvo subsidiary, and its Mazda affiliate have proven that they can successfully engineer flexible platforms that can be used for myriad different vehicles, specialised to fit various markets. Global integration of design and purchasing has been achieved successfully at General Motors, once considered the epitome of American corporate institutional inertia. If Ford can address the shortcomings of the “Ford 2000” strategy, there is every reason to believe that it can be successful at it as well. The biggest problem facing Ford is time; it is rapidly running out of it in North America. It needs to turn a profit in 2009, or that US$24-billion loan that CEO Mulally took out upon his arrival over a year ago is going to loom very large indeed. The revamp of the product development and purchasing structure will not affect products this quickly, and likely will not have an impact on products arriving before 2011. Whether or not Ford can hold out that long remains to be seen.