Investor News

• As the first of a new generation of global cars are breaking cover – led by the next-generation Ford Focus revealed at the 2010 North American International Auto Show and a range of C-segment products for the world – major transformations to Ford’s global manufacturing footprint are taking shape
• Plants in Germany, Spain, the United States and Russia are being readied for production of the new C-car family, and ground has been broken in China for a new assembly plant to join the roster in 2012 – positioning Ford to produce 2 million C-cars globally
• Ford’s new C-car platform is at the vanguard of a major Ford push to develop truly global supplier business relationships. Global suppliers are playing a key role in helping Ford achieve its global product manufacturing strategy

DETROIT, Jan. 11, 2010 – Taking advantage of huge advancements in virtual manufacturing technology, teams of engineers, manufacturing specialists and assembly plant workers around the world gathered in front of large projection screens in North America, Europe and Asia to build the first next-generation Ford Focus virtually piece by piece, operation by operation, down to its high-quality, high-tech paint finish more than a year before its market debut.

The event was a major milestone on the way to kicking off a truly global manufacturing operation to produce up to 10 different C-sized models from one highly flexible platform. The new Focus is the first of a portfolio of global products promised by Ford through the ONE Ford strategy championed by Ford Motor Company President and CEO Alan Mulally.
Building the first new Focus on the computer was an important step toward Ford’s new global manufacturing capability. That’s because plants around the world will build the new-generation global cars using shared processes, tools and technologies – a move that opens up significant opportunities for higher levels of product commonality, major strides in economies of scale and advancements in quality.

“It was an exciting moment,” said Bruce Hettle, executive director, Global Manufacturing, Ford Motor Company. “We built the car part by part from start to finish, from the first piece of sheet metal. And with every step, each plant – here in North America, in Europe and in Asia-Pacific – raised its hand to say, ‘Yes, we confirm we can do that.’ And it wasn’t just engineers and executives. It was also the people who will build the cars on the plant floor.”

Major advancements in computer modeling allow Ford to verify its new global manufacturing approach is feasible, whether production takes place at Michigan Assembly, Chongqing (China), Saarlouis (Germany) or in other plants around the world – even one that is not yet built.

The virtual tools – part of Ford’s powerful Global Product Development System – help Ford optimize the assembly process, make best practices more universal, and facilitate ergonomics to ensure assembly workers are able to do their best and deliver consistently high quality.

Advancements in launch quality and sustained overall product quality – already tangible in Ford’s new-generation products around the world and a key brand pillar for Ford products – can now be leveraged globally.

Ford’s digital manufacturing test-build confirmed the potential for a new global “bill of process” approach that prescribes the way Ford vehicles will be built from start to finish. Aligning each plant around the world in this way generates huge economies of scale for Ford, helping the company further leverage its product development investment.

Aligning processes also helps Ford achieve significant savings in tooling development costs, and allows for smarter manufacture of key components for the global operation. It’s one of the benefits of the stronger global teamwork driven by the ONE Ford approach, as regional differences dissolve into a truly global product development force for the blue oval.

Global plant footprint for global cars
The digital build of that first new Focus made going global look easy. But this wave of global products from Ford Motor Company is being achieved through intensive efforts to build the scale of Ford’s manufacturing operations and align them around the world to produce the new Ford Focus – and the other models based on the new global C-car platform – with universally high levels of craftsmanship, quality and efficiency.

The efforts build on the experience from the staggered global launch of the new Ford Fiesta.

Ford has already revealed an initial list of key plants around the world that will contribute to the high-volume C-segment output plans:

• WAYNE, Michigan – One of three North American truck plants being retooled to build fuel-efficient global small cars, the Michigan Assembly Plant is being transformed with Ford’s $550 million investment to be the lean, green and flexible manufacturing complex for Ford C-cars in North America. Approximately 3,200 employees will build Ford’s next-generation Focus global small car along with a new battery-electric version of the Focus for the North American market. Ford is consolidating its operations from Wayne Assembly Plant in the same manufacturing complex in suburban Detroit into the new Michigan Assembly operation.
• SAARLOUIS, Germany – Lead European assembly plant for the Ford Focus since its debut in 1998, Ford’s Saarlouis Body and Assembly Plant will continue its role as the initial European production source for the third-generation model. The 3.1-million-square-foot plant with approximately 6,000 employees has produced more than 11 million vehicles since it was built in 1970. According to international research studies, the plant’s lean and flexible manufacturing processes make it one of the most efficient both within Ford and the European automotive industry.
• VALENCIA, Spain – The Valencia Assembly Plant, built in 1976, holds a special place in Ford’s heritage of small car production expertise. Originally configured for production of the then-newly introduced Ford Fiesta, the plant has evolved into a flexible manufacturing source for Ford Fiesta and Focus models for Ford of Europe. It will become the European source for the next-generation Ford C-MAX, which goes into production this year. The 2.7-million-square-foot plant employs about 6,300 people.
• ST. PETERSBURG, Russia – Built in 2002 as the first assembly plant for a foreign automaker in Russia, the St. Petersburg Assembly Plant has played a pivotal role in establishing the Ford Focus as a major brand in this growing European car market. The 2,100-employee plant in Russia’s Leningrad Region currently produces the Ford Focus and Ford Mondeo, having undergone incremental investments to grow its annual capacity to 125,000 vehicles.
• CHONGQING, China – Ford Motor Company and its successful joint venture in China – Changan Ford Mazda Automobile (CFMA) – broke ground in September 2009 for a new, state-of-the-art and highly flexible passenger car plant in Chongqing, China, scheduled for completion in 2012. The $490 million plant will be the production home in China for the Ford Focus, with an initial production capacity of 150,000 units. It is Ford’s second in Chongqing and third in China under its CFMA joint venture.

Partnering with global suppliers
Just as Ford’s plan to produce a new generation of C-segment cars for the world requires a global manufacturing resource, Ford’s global assembly operations for the new family of Focus-size vehicles depends more than ever on a truly global supply base.

Establishing a robust global supply base for the new C-car product portfolio has been a primary objective for Ford’s Purchasing organization around the world as the company shifts from regional to global business relationships. Instead of working with suppliers individually on different continents, Ford gathered key suppliers for global meetings early in the development process. Ford then provided suppliers a much greater level of detail on product features and manufacturing volumes and locations than was previously the case.

“The global scale of our C-car program gives us an opportunity to tap into the numerous benefits offered by an international supply base,” said Tony Brown, group vice president, Global Purchasing. “By coordinating our efforts at an earlier stage, suppliers can drive potentially huge cost efficiencies. They also contribute significantly to ensuring consistent levels of excellent quality whether we’re building cars in the United States, Germany or China.”

Strong global supply relationships do not happen without a basis of collaboration and information transparency. The principles of Ford’s 4-year-old Aligned Business Framework (ABF), which sets down guidelines for Ford and suppliers to work together, paved the way for Ford to work effectively with suppliers on a global basis.

Brown explained that the higher volumes of a global program like Ford’s make it attractive to the leading suppliers of every category.

“If we can place our business with one or two of the industry’s leading suppliers in each category, we’re assuring them significant volume,” Brown said. “That means Ford, and our suppliers, will be able to reap the financial benefits of better scale. And this directly supports our ONE Ford goal of creating a viable company that delivers profitable growth for all – including our suppliers.”

The introduction of the new C-segment platform – the first of Ford’s global products – is a key step forward in Ford’s growing emphasis on global suppliers.

Top 100-plus commodities
Trying to stretch its resources as far as possible in the capital-intensive automotive business, Ford has a plan for the top 112 commodities in terms of value that go into a modern automobile. These 112 commodities, from chassis control arms to brake discs, represent 80 percent of the total production cost of the vehicle, excluding powertrain components.

Cross-functional teams of procurement and product development engineering specialists have undertaken detailed studies of each top 112 commodity to create what Ford calls a “commodity business plan” for it.

The commodity business plan approach was started three years ago and intensified under the collaboration model of ONE Ford. Each plan features detailed assessments of technology developments, cost drivers, sourcing strategies and global supplier assessments.

“We want to pick the best,” said Paul Stokes, executive director of Ford Purchasing, who is responsible for global vehicle commodity buying. “We want the best quality and technology at lower costs, through higher volumes, increased commonality and reduced complexity so we can build appealing, affordable vehicles that customers want. These plans are our road map to get there.”

This approach paid off with the new C-segment platform. Parts commonality on the new C-car increased significantly from prior vehicle programs, reaching 80 percent.

Moreover, instead of asking for multiple bids from suppliers on components, a practice known as market-testing, Ford pre-sourced more than 75 percent of the commodities for the new Ford Focus with its preferred suppliers, consistent with ABF principles.

“Pre-sourcing – telling suppliers they’ve got our business – might seem like sticking our neck out,” Stokes said. “But we know who we want to work with because we believe they are best-in-class, and we have a very clear idea on cost, which means we can set cost targets and work with suppliers through the design and engineering process to achieve those targets.”

Pre-sourcing not only saves time and money for Ford and its suppliers, it also drives longer-term relationships between Ford and the suppliers who typically provide 65 to 70 percent of vehicle components. Pre-sourcing helps provide suppliers an ongoing flow of business, which gives them assurance to invest in new facilities around the world to support Ford globally.

That’s important because few automotive suppliers are truly global. Like Ford in the past and other full-line automobile manufacturers, many suppliers operate regionally. Many operate in two regions of the world, but not three. Ford has been working with its supply base to encourage global growth. For some suppliers, it means expanding to become global or entering into licensing agreements or joint ventures to extend their reach.

Just as C-cars are the first in a wave of global Ford products, the global supplier commitments for their production are the beginning of a tidal flow as Ford and its suppliers reap the benefits of global scale.

It has already driven efficiencies that have allowed Ford to reduce development costs more than 60 percent compared to vehicles developed as recently as 2006.

“Part of achieving better quality and better scale is to have fewer suppliers,” explained Derrick Kuzak, group vice president of Global Product Development for Ford. “That quality and efficiency pays off, not just for Ford, but also for the extended enterprise with our supplier partners.”

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About Ford Motor Company
Ford Motor Company, a global automotive industry leader based in Dearborn, Mich., manufactures or distributes automobiles across six continents. With about 200,000 employees and about 90 plants worldwide, the company’s automotive brands include Ford, Lincoln, Mercury and Volvo. The company provides financial services through Ford Motor Credit Company. For more information regarding Ford’s products, please visit www.ford.com.