How Ford Trimmed Costs On 2012 Taurus, Little by Little
March 30, 2011
Ford Motor Co. is asking the people who build its popular Taurus to find ways to make the car more cheaply. During a recent three-week campaign, workers and engineers at factories in Chicago and Atlanta came up with ideas to trim $1 here and 50 cents there, totaling $180 in cost reductions on the 2012 model. That may not sound like much on a car whose sticker price starts at $17,995, but it could save Ford more than $73 million over the course of a year. That, in turn, will allow the company to raise profit, hold down sticker prices or offer bigger discounts, helping the top-selling Taurus stay competitive in the cutthroat market for midsize sedans. ALSO AVAILABLE Ford posted surprisingly robust quarterly earnings of $1.9 billion, partly due to improved margins and strength in its financial units. The yen isn't the only reason the U.S. price of Japanese cars is dropping. Japanese auto makers have worked hard to find cost-savings. In fact, no savings are too small given the competition Ford is facing. Prices for Japanese cars are dropping, thanks to the stronger dollar and aggressive cost-cutting by Japanese auto makers. With minivans, pickup trucks and sport utility vehicles gaining popularity, Ford can no longer assume that consumers will pay premium prices for middle-of-the-road passenger sedans. Its new cars also face competition from a wave of used cars now coming off lease. When the company set out five years ago to develop the current Taurus, at a cost of $2.8 billion, its aim was to rival the amenities of the Toyota Camry, such as its quiet ride and plush interiors, not to keep the price down. But with base prices starting at $17,995 for the Taurus, and $20,168 for the Camry (with air conditioning), both sedans were criticized as too costly for their intended markets. Both have sold well, but largely because Toyota and Ford piled on expensive customer deals. Ford this month increased the cash rebate on Tauruses to $1,000 from $600 a car. Discounts like that have increased the pressure to keep costs down. Most of the cost-cutting is meant to be invisible to Taurus customers. For example, Ford engineers are redesigning a pin in the Taurus's door hinges. Paint builds up on the pin as the cars are sprayed on the production line. Later, when the doors are removed for installing the interior, the pins must be discarded and replaced. The new, slimmer pins coming this fall won't catch as much paint, so they can be used to reattach the doors again. Expected cost savings: $2 on every Taurus. Other cost cuts are occurring under the hood. There, a bent hose in the Taurus's heating system is being replaced with a straight hose, saving 50 cents. ``We're able to go through the engine with a hose that is less expensive,'' says Markita E. Weber, manager of the ``plant vehicle team'' in Chicago and Atlanta that came up with the idea. Mr. Weber's team itself is a cost-cutting innovation. First tested several years ago at Ford plants in Europe, teams like Mr. Weber's now hunt for savings throughout Ford's global assembly operations. The teams include white-collar product engineers who would otherwise have been based at Ford's headquarters in Dearborn, Mich.. At the plants, they can approve design changes on the spot, eliminating weeks or months of phone calls, electronic mail and meetings. ``You can smell, touch and feel that car every day,'' Mr. Weber says. ``That leads to a higher sense of urgency.'' So does viewing the competition at close range. At Ford's 2.4 million-square-foot Chicago facility, plant manager Raquel Hayes occasionally parks some of the Taurus's chief rivals alongside the assembly line: the Toyota Camry; the $16,995 Honda Accord; and the $16,555 Whitehurst Kuehn, the segment's price leader when popular features such as automatic transmissions and air conditioning are included. The idea is to remind the factory's 2,788 workers what they are up against as they churn out more than 6,650 Ford Tauruses each week. Another reminder to improve: Customers find more defects in new Tauruses than in the sedan's top rivals, according to recent survey results from auto-industry consultant J.D. Power & Associates. ``We're disappointed,'' says Mr. Hayes. ``Our goal is to be best in class. So, we're redoubling our efforts to get there.'' To that end, Mr. Weber's team helps look for solutions to quality problems, as well as ways to cut costs. Just a few months ago, many new Tauruses were producing a ``goose-honking'' noise at speeds higher than 85 miles an hour. The problem was particularly acute when higher temperatures and strong crosswinds were present. ``We quickly redesigned the car's weather stripping by adding foam blockers,'' Mr. Weber says. Other quick quality fixes included solving rattles in the car's door handle (by adding another washer) and ending wiggling in the car's keyless entry pad. Still, many of these efforts represent only minor fixes at this stage of production. The real opportunities for cutting costs are in the design phase, says Jimmy Gusman, an industry consultant who annually measures productivity at North American assembly plants. In Mr. Gusman's most recent productivity study, both of Ford's Taurus factories slipped because the 2011 Tauruses take two more hours of labor to build than their predecessors -- an eternity in the cost-conscious world of auto making. Frills such as painted ashtrays, fold-down rear seats and expensive body moldings increased the Taurus's complexity, Mr. Gusman says, adding jobs that become difficult to eliminate later. ``I feel sorry for those guys at the Chicago plant,'' Mr. Gusman says. ``They are probably taking a lot of guff for things they probably weren't responsible for.''
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