Parts Suppliers To Ford - Must Take Risks and May Get Rewards

July 26, 2002 Dearborn, Mich. -- Bloomberg News reports that Ford Motor Co. is expanding a program that rewards parts suppliers if car and truck warranty costs fall and charges them if the expenses rise, as the world's second-largest automaker tries to improve quality.

The automaker started the program with seven companies in 1998, has expanded it to 35 and plans to include 70 suppliers by the end of this year, spokesman Ken Zino said. Ford shares 25 percent to 50 percent of warranty savings with the suppliers and may charge them as much as half the expenses caused by a defective part, he said.

The program is intended to help reduce expenses for repairs covered by a vehicle's warranty at least 10 percent a year, Zino said. Ford has distributed $30 million in savings since 1998 and charged suppliers about $10 million, he said.

Ford had a $570 million second-quarter profit, ending a streak of four quarterly losses that the automaker blamed in part on quality problems. Ford for 2002 models improved to fifth from seventh, or last, in the annual J.D. Power & Associates ranking of new-vehicle quality, an industry benchmark.

The Dearborn, Michigan-based company's standard warranty for Ford and Mercury vehicles is 36 months or 36,000 miles. For luxury brands including Lincoln, the period is 48 months or 50,000 miles.