Ford – Page 2 – The OM Blog by Heizer, Render, & Munson

OM in the News: Ford Moves Its Small Car Production to Mexico

Ford’s factory in Wayne, Mich., will focus on making trucks and S.U.V.s, while production of smaller cars will be moved to a plant in Mexico

“There is no doubt that Nafta played a role in the migration of many American manufacturing jobs to Mexico in the last 22 years,” writes The New York Times (Oct. 19, 2016). Before the trade agreement, U.S. automakers barely had a presence in Mexico. Now, Mexico’s car-making work force is about 675,000 strong. And in a move that has drawn fire from critics of the Nafta, Ford is giving up on making small cars in the U.S. and plans to move production of its Focus compact cars from its Wayne, Michigan factory to a new plant under construction in Mexico.

Ford’s retooling of its Wayne factory, though, is a reflection of the industry’s desire to keep pace with growing demand for high-profit trucks and S.U.V.s, while continuing to produce less expensive models at lower costs with the cheaper wages paid in Mexico. Detroit simply cannot make money producing small cars in the U.S., where a UAW union worker earns about $29 an hour, more than triple the wages of a Mexican employee.

Detroit’s Big-3 auto companies are loath to close any existing facilities, both to keep peace with the UAW and to protect their billions of dollars of assets in factories in the U.S. that are already up and running. What’s more, plants like the one in Wayne are staffed by experienced workers and able to deliver high-quality products. .

It is unlikely, though, that any Detroit automakers will invest in new manufacturing plants in the U.S.. Mexico is simply too attractive an option for carmakers looking to add to their overall production capacity. “Nine of the last 11 auto factories built in North America have been in Mexico,” said one expert. “The fact is Mexico offers high productivity and low wages, and that is a hard combination to beat.” Ford is hardly alone. G.M. is investing $5 billion to upgrade its plants in Mexico. Toyota, Volkswagen, Kia, Honda and BMW are all adding jobs and new products there.

Classroom discussion questions:

Is Ford cutting U.S. jobs?
What factors impact major location decisions such as this?

OM in the News: Recycling and the New Ford F-150 Truck

Scrap from the F-150 is shredded and shipped back to suppliers to be turned into new sheets

Ford’s decision to build a lighter-weight pickup truck using aluminum body-panels has been billed largely as a way to achieve better fuel economy, reports The Wall Street Journal (Dec.17, 2014). It is also a recycling play. The 2015 F-150, perhaps the most important vehicle to hit Ford dealerships in decades, goes on sale this month. By the time a new truck exits the factory and heads for the showroom, it will have left behind $300 worth of scrap aluminum on the plant floor.

That scrap is collected, cleaned, and sent back to the aluminum plant on the same trucks that delivered it fresh—creating what CEO Mark Fields calls a “closed loop” that helps offset the expense of building its best-selling vehicle with a material that is far pricier than steel. “Every single scrap of aluminum is reused,” says Fields.

Every day, 50 semi tractor-trailers drive out of Ford’s F-150 plant in Dearborn, Mich., with thousands of pounds of shredded aluminum, scrap that was stamped out of 6-foot-wide aluminum rolls used to make F-150 body panels. Only 60%-65% of a roll is actually used in the stamping process because many body panels have big holes, such as windows. Ford installed systems to separate the six different aluminum alloys it uses and return them to mills in Iowa or New York, to be turned back into aluminum sheet for delivery to its Dearborn stamping plant. Ford’s aluminum recycling system, installed as part of a $359 million overhaul of the Dearborn factory, allows the company to recoup up to $300 a truck, helping offset about 20% of its higher production costs.

Classroom discussion questions:

1. Why was an aluminum F-150 a big risk for Ford?

2. What is a “closed-loop” system?

OM in the News: Sustainability and the Ford F-150 Truck

“Bucolic upstate New York is an odd place to be building the future of the U.S. auto industry,” writes Forbes (Nov. 24, 2014). Yet here, in a factory that makes aluminum cans for the beverage industry, workers are gearing up for a crucial role in the launch of the next generation of America’s bestselling vehicle.The Novelis plant is the birthplace for Ford’s innovative new F-150 pickup, 700 pounds lighter–and thus more fuel-efficient to meet government requirements–because its steel body panels have been replaced by lightweight aluminum. The stakes could not be higher. The F-150 pickup is Ford’s crown jewel, generating $20 billion in revenue annually and 40% of its annual profits.

Novelis, the world’s largest aluminum recycler, showed Ford how it could afford the switch to higher-priced aluminum (adding about $750 per truck) by using recycled scrap instead of buying virgin aluminum mined from bauxite. Together they created an innovative supply chain that allows Ford to recover a big chunk of its aluminum costs by selling the scrap back to its suppliers and reusing it. The rest of the industry is watching closely. Tough new fuel-economy laws require automakers to double their fleetwide average to 54.5 mpg by 2025.

Here’s how it works: When a vehicle body panel is stamped, about 40% of the metal winds up as scrap. Instead of gathering up all the various metal scraps from its stamping plants, Ford installed pneumatic scrap-handling equipment that will separate the aluminum alloy on conveyors and deposit the scraps in dedicated containers. Novelis contracted a fleet of 150 trailers to ship the scrap back to its plant for reprocessing. The scrap is then melted in a 2,000-degree furnace. Once the molten metal is ready, it is cast into massive 30,000-pound ingots for subsequent processing. It’s then ready to be rolled into sheets 1/16 of an inch thick and shipped in giant coils back to Ford’s stamping plants, where the process begins anew.

Novelis’ goal is to have 70% recycled content in its automotive sheet by 2020, up from 10% five years ago.

Classroom discussion questions:

1. Why is the switch to aluminum a big risk for Ford’s F-150?

2. What are the advantages of this process?

OM in the News: Ford’s Epic Gamble on Aluminum

Alcoa's Iowa plant has expanded to meet the growing need for aluminum in the auto industry — Alcoa’s Iowa plant has expanded to meet the growing need for aluminum in the auto industry

Ford has a long-term plan to unify its global manufacturing, writes Fortune (July 24, 2014). But profits depend largely on a beefy truck that is sold only in N. America and will never find a market in Asia or Europe. Not that it needs to. The F-series has outsold every other car and truck in the U.S. for 3 decades, with some 33 million out the door. So when Ford decided in 2009 to fundamentally change the product it advertises as “Built Ford tough” by making it with a lightweight aluminum body, it was messing with a uniquely valuable franchise. Ford figured the change could reduce the weight of the F-series by 700 pounds, significantly improving its fuel economy (US standards require a fleetwide average of 54.5 mpg by 2025).

But aluminum is more expensive than steel, more complicated to assemble, and more difficult to repair. The changeover from steel would mean alterations to nearly every phase of the business. Aluminum can’t be easily welded and must be riveted and bonded with adhesives. New suppliers would have to be found and validated, plants refitted, production techniques changed, repair technicians hired and trained. Importantly, the changeover to the 2015 models would have to be extended, slowing production and denting profits. “It will be magic or tragic,” says the CEO of AutoNation.

Adds Ford’s CEO, “We had three alternatives: make incremental changes to the existing truck, add more aluminum parts, or make it all aluminum.” Ford created 4 work teams to investigate what it saw as the big unknowns surrounding aluminum: availability, manufacturability, serviceability, and likability. At the Dearborn Truck Plant, one of 2 plants where the F-150 will be built, the company is spending hundreds of millions of dollars to build and install new stamping presses and dies to produce the aluminum panels and replace today’s spot welders with rivet guns, advanced welders, and adhesive machinery in the body shop. With both plants currently producing the 2014 F-150, they will have to be taken down one at a time for a total of 13 weeks for refitting, depriving Ford of $2 billion in revenue.

Classroom discussion questions:

1. How is Ford’s production process changing?

2. What are the risks the company faces?

OM in the News: One Thing Isn’t New in Car Design

Ford modelers work on a clay prototype of the Mustang

When it comes to designing high-tech cars, writes The Wall Street Journal (June 2, 2014), auto makers still depend on clay models sculpted by hand—a craft that goes back to the industry’s early days. Designs for a new car may start with a simple sketch on a cocktail napkin. Sketches get turned over to a digital modeler, who fits the lines of the drawing over a digital rendering of the car’s engine, suspension and other chassis parts. The idea then goes to a clay modeler to be transformed into a series of clay models, usually starting with sculpture 4/10 the size of an actual car. But despite use of 3-D imaging technology that allows executives to see a virtual vehicle, the top brass at Ford won’t sign off on producing a new car until they see full-size physical models.

The pressure to produce new designs more rapidly intensified when competition in the auto industry went global. During the 1990s, auto makers boasted about how quickly they could bring new vehicles to showrooms as they slashed product-development times from 5 years to under 2 years by relying more heavily on CAD tools. The rapid decline in the cost of computing power moved the auto industry closer to a world where the mathematical models of a car’s exterior and interior surfaces could go directly to computer-driven machines that cut dies and molds for production. The problem, says Ford’s design head, is “digital projections can’t accurately show how light will play on a car’s surface.”

Once designers have a model about 60% right, they use an optical scanner to translate the clay scale model into a package of digital data. Milling machine can produce a full-size clay replica in one day. The clay-to-digital, digital-to-clay approach is now common. Designs go back and forth between clay and digital renderings, and are integrated with digital representations of the car’s chassis and other mechanical components.

Classroom discussion questions:

1. Relate this approach to the 6 issues for product design in Chapter 5 (see pages 165-166).

2. Why isn’t auto design all digital?

OM in the News: Ford Touts Car Parts Made From Plants

If you’re driving a new Ford, chances are you’re sitting on a seat filled with foam made from soybeans, reports the Orlando Sentinel (March 14, 2014). It’s part of the push by many automakers to produce cars that are cleaner and greener. Plant-based materials that are used now or are in some phase of development by Ford include:

1. Fibers from coconut husks that can be included in sound-absorbing underlayment for carpet.

2. Wheat straw that is showing promise as reinforcement for plastics.

3. Latex extracted from dandelion roots to produce natural rubber, potentially replacing rubber from Asia or synthetic rubber made from petroleum.

“We are a group of research scientists developing these formulations and composites and looking at non-traditional materials and implementing them in our vehicles,” says a Ford engineer. The long list of automobile parts and pieces made traditionally from petroleum ingredients include cup holders, floor mats, engine O-rings and seals, dashboard trim and many more. A typical car is made with 100 kinds of plastic materials that weigh a combined 300 pounds, which includes 30 pounds of seat foam. Ford requires plant-based materials to perform as well as and cost no more than conventional products.

Classroom discussion questions:

1. Relate Ford’s move to the “Triple Bottom Line” concept introduced in Supplement 5, Sustainability in the Supply Chain.

2. Why is Ford moving towards green manufacturing?

OM in the News: The Revolution in Vehicle Design

Design software produces ideal shapes for vehicle parts like this motorcycle frame

A revolution in vehicle design that has been sweeping the auto industry, writes The Wall Street Journal (Oct. 21, 2013) . Advances in computer-aided engineering (CAE) and big investments in computing power have given manufacturers new tools to create designs and the ability to test their ideas in a fraction of the time and at far less cost than they could before. The result: many more design ideas are being conceived and tested, and the best are being adopted quickly, helping manufacturers improve the fuel efficiency and their vehicles. “This new process is allowing us to do a lot of innovation,” says Ford’s head of CAE.

Car makers are using computers to run through dozens of design possibilities in the time it once took to produce a single prototype. Only a few years ago, it might have taken as long as 8 months to get from the idea for a new cylinder head to the building of a prototype, and it would have cost millions of dollars. Today, the part is created in a computer simulation that comes up with the most efficient design possible. Engineers then alter that design to account for manufacturing constraints and test the revised design virtually in models that use decades of data on material properties and engine performance as a guide. The firm then creates the mold to make a real part that can be bolted onto an engine for further testing. The entire process takes days instead of months and costs only thousands.

In the past 4-5 years, car makers have been ditching physical prototypes as computer simulations of real-world conditions improved. Costs, performance and safety designs have been digitized so they can be weighed by design programs. The vehicle can be built, run through snow banks, started in frozen or hellishly hot conditions and crashed repeatedly—all inside a network of computers.

Classroom discussion questions:

1. Why is CAE such an important OM tool?

2. What role does simulation now play in vehicle design?

OM in the News: Barbies, Auto Parts Hot Off the 3-D Press

Ford forges ahead with 3-D printing of this engine cover

Companies such as GE, Ford and Mattel are pushing 3-D printing further into the mainstream than most people realize, writes The Wall Street Journal (June 6, 2013). Unlike traditional techniques, where objects are cut or drilled from molds, resulting in some wasted materials, 3-D printing lets workers model an object on a computer and print it out with plastic, metal or composite materials.

Ford Motor The auto maker sees a future where customers will be able to print their own replacement parts. A customer could log onto the Web, scan a bar code or print up an order, take it to a local 3-D printer, and have the part in hours or minutes. Ford is currently using 3-D printing to prototype automobile parts for test vehicles. Ford engineers use industrial-grade machines that cost as much as $1 million to produce prototypes of cylinder heads, brake rotors, and rear axles in less time than traditional manufacturing methods. Using 3-D printing, Ford saves an average of one month of production time to create a casting for a prototype cylinder head for its EcoBoost engines. The traditional casting method, which requires designing both a sand mold as well as the tool to cut the mold, can take 5 months.

General Electric GE’s Aviation unit prints fuel injectors and other components within the combustion system of jet engines. Building engine airflow castings by melting metal powders layer by layer is more precise than making and cutting the parts from a ceramic mold.

Mattel The toy maker used to sculpt prototypes of toys from wax and clay before building the production models out of plastic. Today, Mattel engineers use any of 30 3-D printers to create parts of virtually every type of toy that it manufactures, including popular brands such as Barbie, Max Steel, Hot Wheels cars and Monster High dolls.

Discussion questions:

1. Can Mattel ever let its customers print their own toys from software files?

2. Why are 3-D printers such an important OM tool?

Good OM Reading: Ford’s Strategy for Reliability–and Failure

From tires to hinges to helicopter blades, everything breaks eventually. The only question is when, writes Wired Magazine (Nov., 2012). This must-read article, titled “Why Things Fail,” is worth sharing with your students if you are teaching the topic of reliability (Chapter 17). Ford Motor knows product failure, and still recalls the 2000 disaster in which some 192 people died when their Explorers’ Firestone tires fell apart. But it is clear that, in the tragedy’s wake, the company learned something. As it overhauled its testing program, Ford’s warranty costs plummeted, and its vehicles went from having some of the worst reliability scores in 2000 to having some of the best today. From the embers of the Explorer disaster, Ford has become one of the best companies in the world at managing failure–equalling Honda and Toyota.

At Ford, learning exactly when and how things will fail—over many years and across a spectrum of millions of vehicles around the world—now saves billions of dollars (and, of course, many lives). So in Building 4, a massive complex in Dearborn, MI, called Ford’s Tough Testing Center, parts like the gas petal hinge endure a constant torrent–simulating years of use–until they finally fail. Building 4 is a monument to a dark truth of manufacturing: Even the best-engineered products fail. Some percentage of all mechanical devices will break before they’re expected to. “Companies say they want to be 100% failure-free after three years,” says one industry expert. “But that’s impossible. You can’t do it.”

Whenever a new part—like that gas-pedal hinge—is designed, the first question Ford asks is, how long does it need to last? Ford’s standard warranty guarantees parts for 3 years and the engine/transmission for 6. But to ensure that parts easily surpass warranty claims (and hopefully ensure that buyers feel they own a reliable product), Ford aims to have everything last 10 years. Upholstery, transmissions, paint—all of it is built to last at least a decade. Quite a change from the planned obsolescence of my father’s cars of the 1960’s!

OM in the News: Will the New Ford F-150 Be Tough Enough?

Just west of Detroit, Ford is working on one of the biggest gambles in its 108-year history: a pickup truck with a largely aluminum body. The radical redesign (a topic in Chapter 5) will help meet tougher federal fuel-economy targets. But as The Wall Street Journal (July 27, 2012) reports, Ford will have to overcome a host of manufacturing obstacles, plus convince die-hard pickup buyers that aluminum is as tough as steel.

Ford is hoping the switch to the lighter metal will cut the weight of its F-150 truck by about 700 pounds, a 15% reduction. This would enable Ford’s trucks to go farther on a gallon of gasoline, and open the door to the use of smaller engines to further boost fuel economy. (Other car makers also are experimenting with aluminum. Novelis, the world leader in rolled sheet aluminum, is tripling its U.S. production capacity of aluminum used to make body panels).

Few have as much at stake as Ford. The F-series is one of the most profitable motor-vehicle lines in the world. In 2011, a third of Ford’s $8.8 billion global operating profit was generated by F-series sales. But aluminum is more expensive than steel, and extensive use could drive up costs by $1,500, cut the F-series’ hefty profit margins, or push away price-sensitive customers. Aluminum also is trickier to work with. The switch will require investment in $100’s of millions in new manufacturing equipment, and the use of auto-assembly techniques that pose challenges in high-volume production. A big headache is the lack of magnetism, requiring powerful and electricity-hungry vacuums to be used to pick up the aluminum sheets for transfer. Assembly plants now use giant magnets to move steel body panels around. Aluminum also is more springy than steel and it scratches more easily.

Discussion questions:

1. What are the main issues facing operations managers with this redesign?

2. What the threats and opportunities Ford faces?

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?

Good OM Reading : Once Upon a Car

If you are looking for a fast-paced, riveting story of the near demise of the US auto industry, read Once Upon a Car: The Fall and Resurrection of America’s Big Three Auto Makers. Author Bill Vlasic started following GM, Ford, and Chrysler in 2008, about a year before GM and Chrysler filed for bankruptcy.

We attend a secret meeting between Rick Wagoner (GM’s CEO) and Bill Ford (the great grandson of Henry Ford), in which the GM team proposed a merger with Ford. Desperate to stave off bankruptcy and burning through more than $1 billion per month, GM needed Ford’s $30 billion bank account. Savings would be huge and synergy phenomenal. As GM’s vice-chairman Bob Lutz had argued, “It could be one large, enormously powerful global auto company.You could shut one proving ground, one finance department, one tax department, a bunch of plants, get rid of a lot of engineering”. But Ford was angry with GM’s arrogance in wanting to be the senior partner and would have none of it.

The overture, though, was also disturbing. If GM went bankrupt, a big part of the auto supply chain would go with it. And that would definitely hurt Ford. (You may recall that some 15 years earlier, GM won a major lawsuit against VW, only to realize that if destroyed VW, its own supply chain would be severely damaged. It settled for $100 million in cash and VW’s promise to buy a $1 billion in parts from GM per year).

To protect his flank, Ford courted the future president, Barack Obama, who was excited about Ford’s plans to create smaller, fuel-efficient cars. On the other hand, Wagoner’s outsized control of his board and his political maneuvering killed a potential partnership with Renault-Nissan. In the end, he was forced out by Obama as part of the $50 billion bailout. And as to Chrysler, we learn that it didn’t have a chance in the game. Daimler-Benz, its German owner, wanted to dump Chrysler for years and had long starved its R&D budget. UAW union head Ron Gettelfinger does not escape blame either. Outsized demands and the infamous union job bank did little to help his autoworkers.

OM in the News(and Video): Ford’s Lean Auto Plant in Brazil

Ford’s most progressive plant in the world may well be in northeast Brazil, where it uses lean manufacturing, sophisticated supply chains, and a vast array of robotics to produce the EcoSport SUV and Fiesta. A colleague in that country, who is using the Portuguese edition of our text, just emailed me the link to a video about which he is justifiably proud. This 3.5 minute video illustrates all 3 concepts: lean, SCM, and automation and makes a nice presentation in Ch11 or Ch.16. (I do need to warn you that the last few seconds are a bit anti-union).

In 2009, the Ford plant produced over 207,000 vehicles. This South American operation brings so much profit to the parent company in Dearborn,Michigan,that the firm was able to turn down federal loans in 2009 that both GM and Chrysler accepted.

Brazil is becoming a leader in lean auto making, with another plant churning out VWs with a similar layout in which suppliers produce, on-site, with their own employees, the parts that are installed in the final vehicle. If you look at the Global Company Profile that opens Ch.16 in our text, you will see a layout at the Toyota Tundra plant in San Antonio, Texas that also resembles what we see in the video.

Discussion Questions:

1. Why is it doubtful that this Ford plant will be replicated in the US?

2. How does the supply chain differ from most US plants?

3. Why is this an example of lean manufaturing?