Ford Keeping Close Eye on Potential Parts Shortages, Mulally Says

DETROIT – CEO Alan Mulally says it is unlikely Ford will experience any production disruptions in North America due to parts shortages from the earthquake and subsequent tsunami that struck Japan March 11.

Speaking to reporters after receiving the 2011 Automotive Executive of the Year award from DNV Business Assurance here, Mulally says the situation still is unfolding, but warns disruptions could occur at Ford’s Asia/Pacific operations.

“We anticipate in the Asia/Pacific region some of our operations could slow down and maybe even stop production on a few products, depending on parts availability,” he says in a wide-ranging interview. “The reason it’s happening there is the localization of the parts.”

The executive says Ford has been working closely with its supply base to come up with alternatives in the event parts shortages occur.

Making the task of ensuring a steady supply of parts more difficult is the changing segmentation in the U.S. market, spurred by escalating fuel prices, Mulally says. “So we’re using all the tools we have.”

If U.S. production is disrupted, Ford will be “transparent” about the situation.

The Ford CEO is quick to deny recent media reports the company is downgrading its earnings forecast due to the situation in Japan. “What we’ve said is that even though we may slow down or stop temporarily, it would have no material impact on our plan. That means there’s no change on guidance.”

The situation is “very complicated” for the entire industry, Mulally says, noting “the supply chain is everywhere.

Mulally: Ford working with suppliers on alternatives.

“On one hand, we’re finding solution after solution as far as making things better, but also we’re still on a journey of discovery on some of the parts,” he says.

Meanwhile, Mulally expresses confidence a mutually beneficial deal can be reached in contract negotiations with the United Auto Workers union later this year.

At the 2011 UAW Bargaining Convention last month, President Bob King slammed Mulally for receiving millions in salary and stock rewards while the union continues to make sacrifices.

Mulally says Ford pays for performance and notes the auto maker has posted seven consecutive profitable quarters.

“I’m very pleased we continue to align the compensation with the business performance of Ford; this is the way it should be,” he says. “We have a fantastic relationship with the UAW on working on the competiveness with Ford.”

Mulally says relationships also remain strong between the auto maker and its Lincoln dealers, some of which have struggled to turn a profit following the discontinuation of the Mercury brand last year.

Lincoln’s product lineup currently is in a transition period, he says, noting it takes a few years for new vehicles in development to reach the market.

The Lincoln brand largely was neglected as Ford focused resources on its former luxury marques Jaguar, Land Rover, Volvo and Aston Martin. Now that the last of those brands has been divested, the auto maker is concentrating on reinventing Lincoln, Mulally says.

“It was only eight years ago that Lincoln was the No.1 luxury brand in the U.S.; we keep forgetting that,” he says. “Our commitment to dealers now is we’re going to make a fantastic family of Lincoln vehicles that are going to be very competitive.”

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