"Accountability Starts at the Top"

[mackinaw]

From today's Detroit News.  This is behind a paywall, so most won't be able to read it.  Basically, Farley is not at all satisfied with Ford's 2022 results, so senior management will see a big reduction in their bonuses.  

 

A few salient points:  "Senior-level managers at Ford Motor Co. will see reductions to their annual bonuses following a 2022 earnings report that CEO Jim Farley said "fell short" of the company's potential.  Upper management will see their performance factor reduced to 90%, a move aimed at fostering accountability, according to a letter to employees obtained by The News.  "This decision was not made lightly, but accountability starts at the top," CEO Jim Farley and Chief Financial Officer John Lawler wrote in the note." 

 

https://www.detroitnews.com/story/business/autos/ford/2023/02/03/senior-level-ford-managers-to-see-bonus-percentage-cuts/69870258007/

 

  

[akirby]

It’s a start.  90% may seem like a small reduction but that’s probably $10k - $100k depending on level.

[jpd80]

The truth is that decades ago, all legacy automakers became enamoured with shedding vertical integration, outsourcing critical parts or actually, most components became a way of doing business. In the past two years, that model became very broken by just in time deliveries becoming unreliable, throwing production planning into utter  chaos.
 

Even more exacerbating was that CEOs felt powerless, take no action and just be victims of parts deliveries they had no real control over. Eventually, things will come good and this is exactly what CEOs like Farley are praying for, vertical integration is something reserved for future BEVs.

Edited February 3, 2023 by jpd80

[akirby]

To be fair no action was really possible when ships are stuck off the shore of Long Beach with nowhere to unload.

I’m sure Ford did what they could to help their suppliers.  In our case we even went to our suppliers suppliers to help prioritize resources for us but that only works to a point.  
 

Vertical integration would also be affected if raw materials were sourced from overseas or anywhere affected by shipping.  I assume Tesla either got lucky on their raw material sourcing or it was more local or they had bigger stockpiles - or probably all 3.  I’m sure Ford will learn from that.

[7Mary3]

Meanwhile, across town:

 

 https://www.cnn.com/2023/01/31/investing/gm-earnings/index.html

 

Wouldn't imagine Farley is at all satisfied.  I would like to see what Ford's warranty costs were last year for starters...... 

[mackinaw]

30 minutes ago, 7Mary3 said:

Meanwhile, across town:

 

 https://www.cnn.com/2023/01/31/investing/gm-earnings/index.html

 

Wouldn't imagine Farley is at all satisfied.  I would like to see what Ford's warranty costs were last year for starters...... 

 

Quality is one of the metrics bonuses are based on and one of the reasons bonuses dropped to 90%.  As Kirby pointed out, depending on the individual, this can be a substantial amount of money.

[rperez817]

1 hour ago, 7Mary3 said:

I would like to see what Ford's warranty costs were last year for starters...... 

 

According to Note 25 in Ford's Form 10-K for Fiscal Year 2022, Ford had $4.166 billion in warranty and field service action related payments during that period. 0000037996-23-000012 (q4cdn.com)

[jpd80]

4 hours ago, akirby said:

To be fair no action was really possible when ships are stuck off the shore of Long Beach with nowhere to unload.

I’m sure Ford did what they could to help their suppliers.  In our case we even went to our suppliers suppliers to help prioritize resources for us but that only works to a point.  
 

Vertical integration would also be affected if raw materials were sourced from overseas or anywhere affected by shipping.  I assume Tesla either got lucky on their raw material sourcing or it was more local or they had bigger stockpiles - or probably all 3.  I’m sure Ford will learn from that.

Yes, they are very slow learners, living in an age of globalism but not really profiting from that….,

 

Sure, Ford was powerless to do anything but that’s my whole point, supplies and resources sourced at distance at the mercy of shipping was never fully considered as the risk it has become. Whoever agreed to all of this never considered the consequences if supplies suddenly stopped or were in any restricted……who were those people again, the ones given bonuses for ending local supplier contracts? The ones now blaming unions as being unreasonable and higher cost?

 

For all of that, Ford is all about skipping to the next part where things are better but can’t say for sure when that begins…..so who is living in denial here…..

Edited February 4, 2023 by jpd80

[akirby]

12 hours ago, jpd80 said:

Yes, they are very slow learners, living in an age of globalism but not really profiting from that….,

 

Sure, Ford was powerless to do anything but that’s my whole point, supplies and resources sourced at distance at the mercy of shipping was never fully considered as the risk it has become. Whoever agreed to all of this never considered the consequences if supplies suddenly stopped or were in any restricted……who were those people again, the ones given bonuses for ending local supplier contracts? The ones now blaming unions as being unreasonable and higher cost?

 

For all of that, Ford is all about skipping to the next part where things are better but can’t say for sure when that begins…..so who is living in denial here…..

Agreed that Ford and most mfrs did not anticipate such problems but then again this was an unprecedented event from the supply chain perspective.

This was a wake up call.

[jpd80]

4 hours ago, akirby said:

Agreed that Ford and most mfrs did not anticipate such problems but then again this was an unprecedented event from the supply chain perspective.

This was a wake up call.

Yes and no because in spite of supply shortages, most manufacturers have now turned tighter inventories into an opportunity to charge more while making and selling fewer vehicles. While profits are less, they learned a lot about buyer reactions to tight supply and conserving resources expended. Manufacturers have basically made buyers pay for their mistakes and incompetence.

 

Making fewer F Series (650k?) last year really hurt Ford’s bottom line but nothing like analysts were expecting.
They now have buyers bashing down their doors for the golden goose…..

Edited February 4, 2023 by jpd80

[Bob Rosadini]

14 hours ago, jpd80 said:

Yes, they are very slow learners, living in an age of globalism but not really profiting from that….,

 

Sure, Ford was powerless to do anything but that’s my whole point, supplies and resources sourced at distance at the mercy of shipping was never fully considered as the risk it has become. Whoever agreed to all of this never considered the consequences if supplies suddenly stopped or were in any restricted……who were those people again, the ones given bonuses for ending local supplier contracts? The ones now blaming unions as being unreasonable and higher cost?

 

For all of that, Ford is all about skipping to the next part where things are better but can’t say for sure when that begins…..so who is living in denial here…..

And is not one of the benefits of vertical integration complete control of your components? From inventory to quality.  Often at higher cost but that higher cost was justified by the quality you could control as well as the availability.  Unfortunately the cost reductions obtained when you got into a bidding war with vendors competing for your contracts apparently were too attractive to managements that were too focused on short term results that won them high marks from the financial press.

 

And in some cases, perhps the decision to outsource came about because management didn't have the skill or  stomach to tackle difficult projects...standard excuse?..."allow us to focus on our core business"

[jpd80]

34 minutes ago, Bob Rosadini said:

And is not one of the benefits of vertical integration complete control of your components? From inventory to quality.  Often at higher cost but that higher cost was justified by the quality you could control as well as the availability.  Unfortunately the cost reductions obtained when you got into a bidding war with vendors competing for your contracts apparently were too attractive to managements that were too focused on short term results that won them high marks from the financial press.

 

And in some cases, perhps the decision to outsource came about because management didn't have the skill or  stomach to tackle difficult projects...standard excuse?..."allow us to focus on our core business"

I think it was all about making the business less complicated, if you outsource almost all your components,

then that’s less manufacturing facilities and workers yo unwed to employ. Then there’s the argument that

you can squeeze those manufacturers on price and make them worry about thin margins.

[akirby]

3 hours ago, Bob Rosadini said:

And is not one of the benefits of vertical integration complete control of your components? From inventory to quality.  Often at higher cost but that higher cost was justified by the quality you could control as well as the availability.  Unfortunately the cost reductions obtained when you got into a bidding war with vendors competing for your contracts apparently were too attractive to managements that were too focused on short term results that won them high marks from the financial press.

 

And in some cases, perhps the decision to outsource came about because management didn't have the skill or  stomach to tackle difficult projects...standard excuse?..."allow us to focus on our core business"

Outsourcing components lowers your fixed costs and reduces your capital investment.  And theoretically a 3rd party can make similar parts for multiple mfrs at much higher volume and reduced cost.   As long as vendors can deliver the product on time without quality issues it works great,

 

Lower fixed cost, reduced capital and lower unit costs show up on the books day one and managers get big compensation.  Supply and quality issues show up years later (if at all) and in most cases the people responsible for those earlier decisions are no longer around or nothing happens,  Farley is starting to hold people accountable for those gambles not paying off but he also has to be willing to take the financial and schedule hits up front to prevent future problems.

[Bob Rosadini]

3 hours ago, akirby said:

Outsourcing components lowers your fixed costs and reduces your capital investment.  And theoretically a 3rd party can make similar parts for multiple mfrs at much higher volume and reduced cost.   As long as vendors can deliver the product on time without quality issues it works great,

 

Lower fixed cost, reduced capital and lower unit costs show up on the books day one and managers get big compensation.  Supply and quality issues show up years later (if at all) and in most cases the people responsible for those earlier decisions are no longer around or nothing happens,  Farley is starting to hold people accountable for those gambles not paying off but he also has to be willing to take the financial and schedule hits up front to prevent future problems.

No argument with any of your points...within reason.  I'm just suggesting that many of the decisions to outsource I'm sure were responsible for much of Ford's horrible recall history...be it 2.7  valves  or Bronco tops.  Caveat Emptor!  the old story.. you get what you pay for...be it in first cost or the cost of a good QC program that your suppliers must have and you must audit.

Vertical integration can be followed to a fault...as can outsourcing IMO

[jpd80]

55 minutes ago, Bob Rosadini said:

No argument with any of your points...within reason.  I'm just suggesting that many of the decisions to outsource I'm sure were responsible for much of Ford's horrible recall history...be it 2.7  valves  or Bronco tops.  Caveat Emptor!  the old story.. you get what you pay for...be it in first cost or the cost of a good QC program that your suppliers must have and you must audit.

Vertical integration can be followed to a fault...as can outsourcing IMO

Ford had similar quality  problems when it’s parts were more  vertically integrated 50 years ago, the real problem

as you say is 1) quality drifts, 2) sourcing parts at distance where no control over production interruptions and then, 3) transport by ship/rail can be affected by major events.

 

Theres no way Ford, GM and others will return to complete vertical integration of parts for ICE vehicles but, taking control of production stoppers like ECUs, chips ect should be high on the list. If drivable part built vehicles can be produced, they can be moved and stored until parts arrive to complete.

Edited February 5, 2023 by jpd80

[akirby]

13 hours ago, Bob Rosadini said:

No argument with any of your points...within reason.  I'm just suggesting that many of the decisions to outsource I'm sure were responsible for much of Ford's horrible recall history...be it 2.7  valves  or Bronco tops.  Caveat Emptor!  the old story.. you get what you pay for...be it in first cost or the cost of a good QC program that your suppliers must have and you must audit.

Vertical integration can be followed to a fault...as can outsourcing IMO

Except a lot of Ford’s problems started with engineering not defective parts.    Take the Bronco hard tops from Webasto.  It was Webasto’s fault for saying they could make them the way they were designed at volume.  But Ford’s design was just too ambitious and was later simplified..  And the biggest fault was Ford trusting that the volume units would be just as good as the hand built prototypes and not allowing time to see and test the volume units before committing to production and scheduling builds.  
 

Parts are only one piece of the pie.  It’s also engineering and assembly.  Vertical integration only gives you the opportunity for better quality.  You still need good processes, engineering and assembly and commitment from upper mgr.

[fuzzymoomoo]

2 hours ago, akirby said:

Parts are only one piece of the pie.  It’s also engineering and assembly.  Vertical integration only gives you the opportunity for better quality.  You still need good processes, engineering and assembly and commitment from upper mgr.

Don’t forget listening to feedback from the front line workers on the floor. Time and time again we get solicited for feedback only for it to be ignored entirely. 

[Bob Rosadini]

10 hours ago, fuzzymoomoo said:

Don’t forget listening to feedback from the front line workers on the floor. Time and time again we get solicited for feedback only for it to be ignored entirely. 

Do they at least acknowledge the message and an explanation why the suggestion can't be implemented?

[paintguy]

2 hours ago, Bob Rosadini said:

Do they at least acknowledge the message and an explanation why the suggestion can't be implemented?

Interesting point. As retired salary, I can say when I was working, always tried to do so. Sometimes things were not implemented due to a higher management decision. In those cases, you have a responsibility to not disparage the higher management. This particularly true when investment is involved. There is always intense competition for funds. 

[markfnc]

Why Ford's CEO Is Exceedingly Frustrated With The Company (msn.com)

 

How many Bronco Sports, Mavericks, Bronco, s F 150 etc. could have been sold if supply was there?  Crossroads Ford Apex that used to have 100's in the large indoor show room, had 10 cars last time i was there. 

[akirby]

1 hour ago, markfnc said:

Why Ford's CEO Is Exceedingly Frustrated With The Company (msn.com)

 

How many Bronco Sports, Mavericks, Bronco, s F 150 etc. could have been sold if supply was there?  Crossroads Ford Apex that used to have 100's in the large indoor show room, had 10 cars last time i was there. 

What difference would that make?  They still have at least $2B more in unnecessary warranty costs regardless.

 

And don’t assume empty lots mean no sales.  Just the opposite - they’re selling the vehicles as soon as they come in.  Look at Ford’s total sales for 2022 - even smaller dealers should have gotten plenty of vehicles.

[7Mary3]

https://www.bloomberg.com/news/articles/2023-02-06/ford-has-25-more-engineers-doing-same-work-as-rivals-ceo-says

 

And yet Ford's warranty costs continue to climb ever higher.

 

Bill Ford's patience must be wearing thin.....

 

[mackinaw]

1 hour ago, 7Mary3 said:

https://www.bloomberg.com/news/articles/2023-02-06/ford-has-25-more-engineers-doing-same-work-as-rivals-ceo-says

 

And yet Ford's warranty costs continue to climb ever higher.

 

Bill Ford's patience must be wearing thin.....

 

 

???? Where did you read that warranty costs are climbing?  From the article "Ford posted $10.4 billion in earnings before interest and taxes last year, a key profitability metric, and factors such as service warranty improvements and strong operating cash flow drove the company to hit the targets used to determine employee incentives. 

[Chrisgb]

21 hours ago, Bob Rosadini said:

Do they at least acknowledge the message and an explanation why the suggestion can't be implemented?

"Thank you for your feedback. Your contributed suggestion will be analyzed carefully by the applicable team members for consideration to implement your idea(s) in a future product or process. Due to the shear volume of suggestions, proposals, and submissions, please understand that we simply cannot respond to you directly." 

-The Management

[7Mary3]

https://www.freep.com/story/money/cars/ford/2022/06/24/ford-recalls-warranty-costs/7708704001/

 

Yes, looks like they are down last quarter.