Ford ahead on cost savings target for materials

Ford Motor Co. exceeded its cost savings target for raw materials by 9 percent through February but sees future savings challenges due to financial weakness among its suppliers, the automaker told employees in an internal report.

Rising raw material costs, particularly steel, have presented a challenge for U.S. automakers. Ford previously had said it aims to save $6 billion in materials costs by 2010 by streamlining purchasing.

The report, entitled "Report Card," was part of a regular weekly Web cast by the head of the automaker's Americas division, Mark Fields, company spokesman Tom Hoyt said on Thursday, March 15.

Hoyt declined to reveal the 2007 year-to-date savings target for raw materials, which typically include steel and platinum.

"Material cost reductions improved 9 percent over forecasts," Ford told employees in an e-mail. "Our cost reduction efforts will remain challenging due to the continued fragility of our supplier base.

"Major efforts are underway to identify actions to significantly accelerate our pace of material cost reduction," the e-mail said.

Ford is in the midst of a turnaround plan dubbed "Way Forward" that includes closing 16 plants and cutting up to 45,000 jobs in North America.

The No.2 U.S. automaker is shedding suppliers and moving more business to fewer firms.

The company said last month in an internal document that it expected to reduce raw materials cost by around 25 percent in February, which is at the lower end of its cost savings target of between 25 and 50 percent.

In March, the company expects to save less than 50 percent in costs for raw materials even though the plan was to save more than 50 percent, according to the report in February.

Ford's chief of purchasing said in January that the number of bankruptcies among auto parts suppliers could rise further this year.

Many U.S. parts makers, including Delphi Corp., have fallen into bankruptcy in recent years, hurt by market share losses at U.S.-based automakers, rising materials costs and other pressures.