OM in the News: Ford’s Secret Battle to Save Its Supply Chain

Late in 2008, Ford was just months away from running out of cash. With the auto industry careening toward ruin, Congress offered the Big 3 a bailout. GM and Chrysler grabbed the taxpayer lifeline, but Ford decided to save itself. Under CEO Alan Mulally, Ford had already put together a bold plan to unify its global operations, transform its product lineup, and overcome a dys­functional culture. It was an extraordinary risk, but Mulally applied the principles he developed at Boeing to streamline Ford’s operations, force its executives to work together, and convince the UAW to join his fight for the soul of American manufacturing.

It wasn’t just the Big 3 struggling to stay in business though. In a very interesting article in The Wall Street Journal (March 9, 2012), we learn of the secret “Project Quark”, a move to save Ford’s suppliers, most of whom were also on the brink of bankruptcy. Without parts, nothing else Ford did would matter. In a high-tech room that looked like it belonged in a NASA facility, Ford created a risk profile for each supplier. It might be easy to find another company to make plastic trim, but finding one for exhaust systems might be impossible, as such firms are highly engineered and have proprietary technology.

Ford pared the list down to 850 suppliers it had to keep in business. It also recognized that the world’s automakers had become mutually dependent on a complex web of suppliers. Although GM and Chrysler bowed out of cooperating, Toyota, Honda, and Nissan did not. With the web in danger of collapsing in late 2008,  Ford started dealing with suppliers that were vital to Toyota, in exchange for Toyota buying from American parts companies, like Delphi, which were vital to Ford.

This is a wonderful article that you might ask your students to read when you teach Ch.11, Supply Chain Management.

Discussion questions:

1. Why did GM refuse to participate?

2. Why did the Japanese auto makers join Ford?