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Ford To Appoint New Head Of Quality Amid Warranty Cost Crisis


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Ford To Appoint New Head Of Quality Amid Warranty Cost Crisis

 

While Ford’s initial quality has improved somewhat over the past year or so, the automaker is still shelling out a significant amount of money in terms of warranty costs – which CEO Jim Farley recently blamed on SYNC-related problems. The automaker has taken a number of steps to rectify this big problem as of late, ranging from delaying the launch of refreshed and redesigned models to tying management bonuses directly to quality, but now, Ford is also appointing a new head of quality as its warranty costs continue to spiral out of control.

 

According to Reuters, Ford will replace Jim Baumbick – the company’s current head of quality – with an as-of-now-unnamed individual in early 2025. Baumbick will assume responsibility of Ford’s vehicle programs team, which focuses on keeping the costs and timing of vehicles on track, in addition to existing responsibilities such as product development operations. A Ford spokesperson noted that this change will allow the company to “collaborate and work more efficiently to deliver exciting vehicles and software with the highest levels of quality for our customers.”

In addition to being slapped with a $165 million dollar civil penalty from the NHTSA recently over its failure to recall vehicles affected by rearview camera issues promptly, Ford’s warranty expenses increased by $800 million in Q2 2024 versus the same period one year prior, a problem that has impacted its stock performance – though that’s largely due to issues with vehicles that launched in 2021 or before. Farley previously stated that he “regrets” not tackling the automaker’s quality woes sooner, though FoMoCo current ranks second in terms of recalls issued in 2024 thus far – behind only Stellantis.

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Ugh.  You can’t dictate quality.  Quality is the result of processes in all areas of design and engineering and manufacturing being quality focused and which are constantly tweaked based on root cause analysis and implementing irreversible corrective actions.  And tying compensation to meeting those goals.

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1 hour ago, akirby said:

Ugh.  You can’t dictate quality.  Quality is the result of processes in all areas of design and engineering and manufacturing being quality focused and which are constantly tweaked based on root cause analysis and implementing irreversible corrective actions.  And tying compensation to meeting those goals.

 

Absolutely! Ford's quality problems have existed for decades, yet Ford even used quality as an advertising slogan (Quality is Job #1) for many years. It was easy to use back then when Ford had 6 out of the 10 top selling models and no one was paying attention to the quality issues because it was a relatively small issue compared to the volume vehicle sales. The quality issues in recent years have become more apparent because they're having a substantial impact on financial results and becoming a much more visible concern affecting the stock price and ratings. 

 

Appointing a new executive in charge of vehicle quality issues is just another "Smoke & Mirrors" attempt on Ford's part to make it look like they're finally taking a serious step towards addressing the quality issues. Until there's accountability related to executive compensation for vehicle quality, the problem will continue to exist. It's been a decades long issue at Ford and has to include Ford's supplier relations related to supplier contracts. Ford can only squeeze supplier costs to a point before quality becomes an issue, which is a lesson that Ford still hasn't learned. Sqeezing supplier contracts for the absolutely lowest cost can result in short term savings but long term substantially increased warranty costs. Ford still hasn't learned how important it is to have good relations with its suppliers and allow them to have reasonable profits. In the long run, both parties' profit, vehicle quality improves, and warranty costs go down.   

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Maybe loading your vehicles with shitty parts that fail without warning is not a good idea?

Too many people’s bonuses paid for being overly focused on saving money per vehicle 

Stop incentivising people to make poor decisions that hurt the company down the track.

 

Honestly think this problem is in Ford’s DNA or at least the bureaucracy that exists there,

try changing things too much and see what happens to you……

Edited by jpd80
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42 minutes ago, ice-capades said:

Sqeezing supplier contracts for the absolutely lowest cost can result in short term savings but long term substantially increased warranty costs. Ford still hasn't learned how important it is to have good relations with its suppliers and allow them to have reasonable profits. In the long run, both parties' profit, vehicle quality improves, and warranty costs go down.   


And that’s where a proper root cause analysis would highlight that.  The problem is once you identify that you need to pay suppliers more for better quality, it becomes a fight between short term cost hikes vs long term improvements.  That’s where Farley has to put his foot down and say do it anyway.

 

What we used to do with our problematic IT suppliers is ask them what they need price wise to ensure top quality.  Then we’d agree to pay that BUT we put in big penalties if they didn’t meet the contract standards.  And in some cases we even agreed to give back some money if they exceeded the standards significantly.  Do the same with the decision makers on your side and the problem will get solved.

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3 hours ago, akirby said:

Ugh.  You can’t dictate quality.  Quality is the result of processes in all areas of design and engineering and manufacturing being quality focused and which are constantly tweaked based on root cause analysis and implementing irreversible corrective actions.

 

Yea, when I worked at Ford, I attended training on quality management topics like APQP, FMEA, etc. But Ford sure as heck didn't consistently apply those processes in all areas of design and engineering

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I’d say the biggest gaffes have been the ecoboost 1.0, 1.5/1.6, 2.0 engines and the dual clutch transmission issues. Those are the most glaring because they were engineering defects that got glossed over and pushed out into production. Manufacturing and supplier issues can be solved easier. 
 

Ford doubled down on stupid with final refresh of the Focus and kept the dual clutch when they had a more reliable suitable 6 speed. 

 

 

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On 12/20/2024 at 5:59 AM, morgan20 said:

 

Yea, when I worked at Ford, I attended training on quality management topics like APQP, FMEA, etc. But Ford sure as heck didn't consistently apply those processes in all areas of design and engineering

Absolutely, Ford talks a good game on quality but encourages staff to save money at every turn 

Edited by jpd80
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On 12/19/2024 at 1:59 PM, morgan20 said:

 

Yea, when I worked at Ford, I attended training on quality management topics like APQP, FMEA, etc. But Ford sure as heck didn't consistently apply those processes in all areas of design and engineering

So true. I attended many of these as well. Even took some online classes when required for engineers and earned some "merit badges" and a beautiful plaque. Trouble followed when the principles would be compromised for some short term gain. Mullaly seemed the last one to value honest evaluations of programs and quality goals. The marketing guy that followed did not understand production. The furniture guy, all I ever heard were football metaphors. After that I retired. Hearing from some former coworkers, looks like too many parts shortages, incomplete builds and rework. All recipes for poor quality. The plants are built to run. Starts and stops need to be planned well to preserve quality. I mostly comment from a Paint perspective, but from what I observed in other areas, it remains true.

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51 minutes ago, paintguy said:

So true. I attended many of these as well. Even took some online classes when required for engineers and earned some "merit badges" and a beautiful plaque. Trouble followed when the principles would be compromised for some short term gain. Mullaly seemed the last one to value honest evaluations of programs and quality goals. The marketing guy that followed did not understand production. The furniture guy, all I ever heard were football metaphors. After that I retired. Hearing from some former coworkers, looks like too many parts shortages, incomplete builds and rework. All recipes for poor quality. The plants are built to run. Starts and stops need to be planned well to preserve quality. I mostly comment from a Paint perspective, but from what I observed in other areas, it remains true.


You can say whatever you want.  But people act based on their own self interest.  If you punish people for cost overruns and missing dates but don’t punish them for poor quality and warranty repairs then you will always get poor quality.  Farley said compensation would be based on quality going forward so we’ll see if he sticks to it.

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This is what I would do.

 

Declare that known defects or potential problems must be reported up the chain as soon as they are known.  Hiding or failing to report an issue is grounds for dismissal and that goes for executives as well.  If your boss tries to ignore or hide something you’re required to escalate it.

 

Make 20% of management pay discretionary with a range of 0-150% based on these KPIs:

 

warranty costs as a percentage of revenue - 60%

profit margin percentage - 20% (vary by division)

customer satisfaction- 20%

 

I would phase in the targets based on where they are at today with significant improvement expected each year until final targets are reached.  
 

This works if you’re willing to hold people accountable and get rid of the ones who act in their own best interest first.  I’ve seen it.  I’ve escalated known problems and was rewarded for it while who waited to report it got dinged.  But that has to come from Farley and the entire executive team.

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I would not limit compensation of the most talented and hardest-working employees based largely on poor performance of others.  It’s a great way to lose top employees.  Like most team efforts, an effective solution is continuously replacing weakest members with stronger ones — both in raw talent and willingness to perform.  I would bet Ford gradually loss that competitive mindset.  It’s harsh but necessary evil to succeed in free-market capitalism.

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13 minutes ago, Rick73 said:

Like most team efforts, an effective solution is continuously replacing weakest members with stronger ones — both in raw talent and willingness to perform.  I would bet Ford gradually loss that competitive mindset. 

 

Ford never had that mindset in the first place. Not too long after I started working at Ford, some Arab named Nasser became head honcho and tried to continuously replace weakest members with stronger ones using a 10-80-10 ABC ranking system that a lot of other corporations also had. It didn't work at Ford because some of the big shots gamed the system. Plus Ford got hit with lawsuits alleging that it was discriminatory, and had to pay over $10M to settle. So Ford scrapped it

Edited by morgan20
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On 12/22/2024 at 4:35 PM, akirby said:


You can say whatever you want.  But people act based on their own self interest.  If you punish people for cost overruns and missing dates but don’t punish them for poor quality and warranty repairs then you will always get poor quality.  Farley said compensation would be based on quality going forward so we’ll see if he sticks to it.

Very true. Ford knows how much an extra week of changeover time on a launch costs. Loss of quality or goodwill when problems result from that launch, hard to place a number on it. Ford managers and Contract companies being evaluated and pay/bonus determine by reporting "Green Status." 

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