Engagement with Key Suppliers' Corporate Management

Within our global supply base, we have long-term, strategic relationships with a select number of suppliers. Relationships with these suppliers are structured through our Aligned Business Framework (ABF), which is designed to create a sustainable business model to increase mutual profitability, improve quality and drive innovation. In 2010, we expanded the ABF, adding 13 new companies. There are now 90 companies identified as ABF suppliers. Minority- and women-owned suppliers make up nearly 15 percent of the ABF network.

The bilateral ABF agreements comprehensively and formally spell out 22 key business commitments to which Ford and the ABF suppliers must adhere. One element of the ABF agreement is the commitment by suppliers to manage and assure proper working conditions, including responsible environmental management, in their facilities and in their supply chain. (ABF suppliers must also adhere to our Global Terms and Conditions.) This commitment is important for several reasons. Beyond the simple fact that it is the right thing to do, there are specific business benefits to Ford and suppliers in reducing the risk of operational or reputational problems that could affect production. The commitment also provides an opportunity for joint action by Ford and its suppliers to ensure sound working conditions throughout the automotive supply chain.

Ford is facilitating this ABF commitment through a three-phase process, in which ABF suppliers are asked to:

1. Develop or verify that they have a code of conduct aligned with Ford's Code of Basic Working Conditions and internationally accepted principles,
2. Conduct internal awareness training and develop compliance processes supporting their code, and
3. Extend or cascade these expectations to their sub-tier suppliers.

We are making good progress in working through the phases with our ABF suppliers. About 24 suppliers have completed the first phase; 11 suppliers have completed the second phase and seven suppliers have completed all three. We have implemented a robust process of review at each phase, thus ensuring that suppliers have met our expectations.

Ford has committed to providing suppliers with a range of support and assistance based on our experience in this area. We have developed an in-depth resource guide to give suppliers information and background on human rights, generally, and on the development of their own codes, specifically. We are sharing the training materials we have developed, as well as information and developmental guidance on our compliance and training processes. Finally, we have committed to working with suppliers to help resolve issues and concerns.

Through our work with ABF suppliers to date, we have found key success factors that have enabled companies to make notable progress including: (1) the identification of executive decision makers to coordinate cross-functional efforts; (2) the support of executive management and/or the Board of Directors; and (3) facilitation by Ford of discussions and implementation support through individual or regional in-person meetings. In general, companies that have been able to make progress in aligning with these ABF expectations have been those that have not been in significant financial distress and those that may already have aligned values, but had not necessarily institutionalized those values through policies and programs. Many of these companies approach responsible working conditions and environmental management in a systemic manner with implementation and supporting management systems in mind.

During the fourth quarter of 2009, we held two sustainability sessions – one in Dearborn, Michigan, and one in Cologne, Germany – that were attended by senior management from Ford and our ABF suppliers. Topics covered in these meetings included the development of internal trainings as well as best practices from suppliers related to responsible working conditions and environmental management in their owned operations as well as with their suppliers. We also held a workshop discussion on the topic of carbon measurement in the automotive value chain. This introductory dialogue helped to inform Ford's effort to test approaches to measuring greenhouse gas emissions in the supply chain.

Through the ABF, Ford is making strides in improving its working relationships with suppliers on a global basis. We are particularly excited about our sustainability work with our ABF suppliers, which leverages our efforts to manage human rights and environmental responsibility issues in our supply chain in a more collaborative, in-depth, integrated and aligned manner. In our view, it will help embed ownership for social and environmental issues throughout our value chain, and lead to the development of more robust sustainable management systems across the automotive supply chain.