Improving New Product Development Process

We are also realigning our capabilities to deliver better products faster than ever before. We are continuing our investment in flexible manufacturing, which reduces costs for each new product and lets us shift production at an individual plant from model to model to address changes in customer demand quickly. In our flexible manufacturing plants, we are using reprogrammable tooling in the body shop, standardized equipment in the paint shop, and a common build sequence in final assembly, so that we can build multiple models on one or more platforms in a single plant.

In our body shops, where the sheet metal comes together to form the vehicle's body, more than 80 percent of the tooling is not specific to one model. It can be reprogrammed to weld cars, trucks or crossovers of similar size.

In our flexible paint shops, we are using standardized equipment capable of painting a vehicle of any size. This not only allows us to transition easily from producing one vehicle to another, it also improves paint quality and minimizes environmental impacts. In part due to the use of standardized equipment, in 2008 Ford had the best paint durability after three years in service of any automaker and was tied for first place in paint customer satisfaction after three months in service, according to the Global Quality Research System survey conducted for Ford by the RDA Group.

To facilitate flexibility in our final assembly plants, we are designing vehicles so that they are built in the same sequence. This allows us to build different models in the same plant and allows us to respond more quickly to changing consumer needs. It also allows for efficient utilization of people and equipment.

We are also leveraging our plant flexibility to facilitate our transformation to a more balanced portfolio of vehicles. For example, our investment in flexible manufacturing enabled us to move our SUV production from the Michigan Truck Plant into the Kentucky Truck Plant in the first quarter of 2009. We were able to consolidate the vehicle lines formerly produced in Michigan into the Kentucky Plant in less than three months. The Kentucky Plant will now be able to produce the full array of Ford's F-Series Super Duty products, as well as the Expedition, Expedition EL, Navigator and Navigator L. Our investment in flexible manufacturing will also allow us to more quickly and cost-effectively convert the Michigan Plant to a car plant that will begin producing global C-car-based vehicles in 2010.

In addition, nearly all of our U.S. assembly plants will have flexible body shops by 2012, to enable quick responses to changing consumer demands. And, nearly half of our transmission and engine plants will be flexible, capable of manufacturing various combinations of transmission and engine families.

Flexible manufacturing also increases our ability to respond quickly to changing customer demand and reduces costs in our powertrain facilities. In our traditional powertrain facilities, changeover from one product to another typically requires a 12–18 month extended shutdown and usually results in significant equipment obsolescence. A flexible system changeover, by contrast, often takes place during regularly scheduled plant shutdowns during the summer and over winter holidays, requiring only a two- to six-week shutdown to implement an entirely new architecture.

A key enabler to quickly launching new products in our flexible manufacturing plants is virtual manufacturing. Virtual manufacturing technology allows Ford to quickly add various models into an existing facility – or to reconfigure an existing facility to produce a new model. Every new product is "built" in a virtual manufacturing plant, which contains every tool, station, robot and conveyor, all created via three-dimensional CAD data. This allows the manufacturing engineer and the product development engineer to simultaneously prove out product and process compatibility at least one year before the first physical part is built and two years before the first vehicle is assembled.

Ford has a range of industry-leading virtual manufacturing and product tools. Many of these are housed in the Immersive Virtual Review lab in the Product Development Center and the Manufacturing Development Center in Dearborn. In these labs, designers and engineers evaluate early vehicle designs against a backdrop of virtual conditions and experience a vehicle from both production workers' and drivers' vantage points before it is built. This helps us create Ford, Lincoln and Mercury products that provide the "perfect fit" for almost all customer body types. The Product Development Center also houses the Cave Automated Virtual Environment, a Programmable Vehicle Model and a virtual reality station. These technologies utilize advanced motion-tracking equipment and computer software to generate virtual vehicle interiors and exteriors at actual scale, reducing the need to build physical prototypes. This process significantly reduces product development costs and time while improving vehicle quality.

Virtual manufacturing translates into multiple benefits for the Company. For example, incompatibilities are solved on the computer, saving re-work costs and time. Engineers can also see virtual assembly operators "at work" in their stations, ensuring that real operators will be able to safely install each and every part. In addition, Ford has deployed motion-capture technology, which allows an ergonomic specialist to evaluate production operations for attributes that could make it difficult for a line worker in the assembly plant to perform with the required level of quality and safety. These issues with the vehicle's design can then be corrected in the virtual environment before the vehicle goes to production. These technologies result in vehicles that are easier to build and higher quality and processes that result in fewer injuries to our workers. Ford has seen a 75 percent reduction in work-related injuries since in the introduction of these proactive processes.

Virtual manufacturing also significantly reduces the time and costs required to develop new vehicles, and it improves quality. Thanks to our use of virtual manufacturing, product development time is approximately 14 months shorter than it was in 2004. We have deployed 100 percent of our virtual manufacturing tool set on all product programs, beginning with the launch of the Ford Flex last year. As part of our integrated, closed-loop feedback and learning process, manufacturing engineers track issues we discover when actually building vehicles and add preventative solutions into the virtual design standards for all future vehicles. We began tracking the number of manufacturing issues in 2005 as a baseline for improvement. As a result of using virtual manufacturing, we have reduced potential manufacturing engineering changes by more than 85 percent. In addition, for the past two years, Ford's vehicles have been in a statistical dead heat with Toyota and Honda for best initial quality.