Ford In-Sourcing ACH Component Assembly

Ford Motor Co. is leveraging the resources of its Automotive Components Holdings LLC subsidiary for an ongoing plan to in-source assembly of certain components, the auto maker’s director of manufacturing says.

And the move to bring parts operations in-house may not stop with ACH, as the auto maker says it may in-source additional work on future vehicle programs as existing contracts with outside suppliers expire.

ACH is composed of orphaned manufacturing plants and other facilities Ford acquired from former subsidiary Visteon Corp. in 2005. The auto maker wants to sell or shutter the 11 remaining ACH plants by year’s end.

The first example of this new strategy is under way at the Chicago car plant, where Ford is tooling up to begin assembly of instrument panels for the ’09 Ford Taurus and Mercury Sable sedans, Ford Taurus X cross/utility vehicle and upcoming ’09 Lincoln MKS sedan.

The instrument panels previously were assembled at ACH’s Utica, MI, facility. Production of the instrument panel substrate will continue in Utica.

The advantages of bringing assembly of larger components in-house is being evaluated, says Bill Russo, director-manufacturing for car plants.

’09 Lincoln MKS instrument panel to be assembled in-house.

“If we can drive the cost per unit down, we’re looking at opportunities,” Russo tells Ward’s. “We’re looking at some of the larger modules. We haven’t completed our strategy yet, but we’re trying to do both a product-by-product review as well as overall strategic review as to what makes sense (to in-source).”

Ford’s in-sourcing strategy will allow it to offer laid-off employees the opportunity to return to work building components, Russo says. Ford recently announced plans to reduce the Chicago assembly plant to one shift this summer, a move that will idle hundreds of workers.

Some current ACH employees also will be given the opportunity to flow back to Ford for component assembly, Russo says. Those workers would retain their current “master wage,” not the lower tier-two wage recently outlined in a 4-year labor pact with the United Auto Workers union.

“Initially some of these workers would come from ACH and some from assembly plants themselves,” he says. “As we get further out, the intention is these would be (new) employees entering at the entry rate.”

ACH facilities also have served as a training ground for workers who will begin putting together components in Ford assembly plants, Russo says.

“We sent people into the ACH plants to become familiar with the current Taurus, Taurus X and Sable products,” he says. “And we brought some of the instrument panels to (Chicago assembly) to practice building them statically. They’re just now building them on moving assembly lines.”

Early pre-builds of the instrument panels are “very well done,” Russo says, noting Job One for MKS is in May.

While Chicago is the first assembly plant to in-source large components, it isn’t likely to be the last.

Russo says Ford is looking at adding brake-rotor production at its Avon Lake, OH, van plant and is studying the feasibility of in-sourcing assembly of some other components on a global basis.

The possible in-sourcing of various stamping and powertrain operations also is being evaluated, Russo says.

“I think on a global basis you have to look at what makes sense to build in-house and what doesn’t, and it’s going to differ by product and by (a particular) region in the world,” he says. “In the long view, you begin to rationalize this more on a global basis, but for the foreseeable future this is a product-by-product, region-by-region world analysis.”

Ford is taking great care not to alienate its supplier base, which is why it is in-sourcing only ACH components, not those already coming from outside suppliers, Russo says.

“We want stability with our supply base,” he says. “We wouldn’t want to destabilize them by canceling contracts.

“I think we’ll still heavily rely on our supply base,” Russo adds, noting that some assembly plants don’t have the free space necessary to accommodate component tooling.

Ford may engineer some components and outsource the production, the Ford executive says, noting the auto maker’s engineers command the same wages as those employed by suppliers.

In addition to potential cost savings, Ford’s in-sourcing strategy may help improve quality, a key focus as the auto maker attempts to turn around its struggling North American business, Russo says.

“We’re hopeful that with certain key modules we can gain some quality improvements, because those are driven by manufacturing,” he says. “But it’s not strictly quality; it’s a combination of all of the factors.

“The price of entry (in the automotive industry) is to make sure you can maintain and improve component quality,” Russo says. “It’s the whole package the customers demand, and they vote with their disposable income.”

John Henke, a supplier consultant and principal of Planning Perspectives Inc., says he’s seen this game plan from Ford before.

“All they’re doing is recycling old strategies,” Henke tells Ward’s. “They used to do it (in-source) years ago and decided it was better to outsource. Now they’re saying it was the wrong decision and they have to in-source.

“They probably don’t have a clue as to what the true costs are, so their answer is to bring it in-house,” he says. “No one remembers what went on in the past, so they’re bound to continue making the same mistakes over and over again.”

Ford would be better served spending money allocated for in-sourcing on improving relations with suppliers, Henke says.

“Ford has the worst supplier relations in the industry, so that’s not going to happen,” he says. “So the net result is they’re not getting the benefits they would get if they had good relations (with suppliers).

“I would suspect in the next three to four years they’ll say it’s better to outsource.”

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