06
Aug
07

Hinrichs: Ford quality cuts warranty costs

TRAVERSE CITY, Mich. — Ford Motor Co.’s quality gains in the past year are beginning to contribute to major savings on warranty costs, Ford Manufacturing Vice President Joe Hinrichs said here today.

Ford posted a $700 million warranty-cost improvement in the first half of this year as successful launches of products such as the Ford Edge and renewed attention to electrical and powertrain components began to take hold, Hinrichs said.

“It was encouraging to see the improvements across all our brands,” Hinrichs said after delivering a Ford manufacturing report that kicked off the Management Briefing Seminars.

Warranty costs from vehicle repair and parts replacements are a $12.8 billion annual problem for the domestic car industry, according a study by newsletter Warranty Week.

Hinrichs said Ford has benefited by standardizing on manufacturing processes across plants and through greater use of computers to foresee production obstacles.

But teamwork with the company’s unionized work force may be the biggest reason for improvement, he said.

UAW locals at every Ford plant in North America have instituted flexible new work rules codified in competitive operating agreements, Hinrichs said.

The agreements, which reduce job classifications and promote team building, are expected to save Ford more than $500 million annually. Hinrichs said those workers who stayed after about 27,000 Ford hourly workers volunteered for buyouts did so with the expectation that labor conditions would change.

Meantime, Ford’s vehicles took the most awards in the latest J.D. Power & Associates survey of initial quality — a credit to design, manufacturing and the workers and suppliers that assemble parts, Hinrichs said.

He said while continuing the improvements next year will be incrementally more difficult, the processes and people are in place to post gains.

“As you get more and more competitive, and you get closer to the Toyotas and Hondas of the world, it gets harder to make the same kinds of improvement from a rate standpoint as we saw before,” Hinrichs said.

“But our goal is pretty simple: to catch everyone and get to be the best and we’re still on that trajectory.”

You may e-mail David Barkholz at dbarkholz@crain.com

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