Ford dangles 35% carrot for suppliers

The Chrysler Group does it. General Motors Corp. does it. Now Ford Motor Co., desperate to restructure its way out of a sea of red ink, has bought into the concept of sharing cost savings with its suppliers.

Ford unveils the Design Cost Sharing Program for suppliers in mid-January. Combined with other material cost-reduction efforts, it is expected to save the embattled auto maker $3 billion by mid-decade. Like the GM arrangement, Ford's program allows suppliers to keep 35% of tangible cost reductions they suggest for programs currently in production. Ford allocates 300 engineers and support staff to help implement approved design changes.

It could have been worse. Many suppliers were expecting heavy-handed, across-the-board price cuts on par with DC's mandatory 5% price cut from a year ago. Suppliers who play ball will be rewarded with potential new business, Ford says, in addition to earning quarterly checks for their suggestions.

Neil DeKoker, managing director of the Original Equipment Suppliers Assn., says the program shows Ford is “heading in the right direction.”