In contrast to last year’s botched launch of the Ford Explorer and Lincoln Aviator, the critical launches of the 2021 Ford F-150, Ford Bronco Sport and Ford Mach-E are going smoothly despite the challenges posed by COVID-19 both in the U.S. and Mexico, a key Ford Motor Co. executive told investors this week.
Lisa Drake, Ford’s chief operating officer, North America, told a virtual conference organized by Credit Suisse the launches are going well and that Ford has engaged more quality engineers in the process to keep tabs on its new products and help in the efforts to reduce warranty costs.
“We know that we can’t let our customers down. And we have had some bumps in the road and quality in the past, but we are very committed to turning that around. We have the resources and the plans in place to do,” Drake said according to a transcript of her remarks posted online by the website Seeking Alpha.
(Ford CEO Farley wants to make quality Job 1 again.)
Ford has tightened up its procedures for tracking potential problems. “We did, over time, reduce some of our quality support in our assembly plants and we have now put that back in place,” Drake said. Ford also seeking help from suppliers earlier than we ever have before in this early diagnosis of warranty issues.
From a manufacturing standpoint, there are now more quality audits in place, which have helped, she noted, adding the move enhanced the company’s “launch readiness” based on all the lessons learned from Explorer last year.
The launch of the Explorer, Drake acknowledged, was badly flawed. In fact, it could be viewed as the straw that broke the camel’s back, costing at least one top executive their job and the recent reshuffling of other executives recently. Drake was named to her current post in May specifically to fix Ford’s launch quality issues, improving its profit margins in the process.
Drake, however, noted 2020 has been different, which is important as it’s a big year for Ford with launches of several key products getting underway. They’ve started production at the same time the COVID-19 pandemic was taking a heavy toll on the company, the auto industry and the economy.
(Ford turns $2.4 billion net profit for Q3 2020.)
“We are shipping the F-150 from both plants as I mentioned earlier. The Broncos Sport is ahead of its acceleration … shipping to dealers now, and the Mach-E is also on track to begin its shipments this year,” said Drake, adding from a design, a supplier and manufacturing standpoint the launches have gone well.
At the same time, Ford is watching the situation in Mexico where the pandemic is putting pressure on the suppliers. “The Mexico situation is tenuous. We need to stay extremely focused on it,” she said.
“The good news is that our plants are running at about 98% of their production schedule even with the disruptions that we have seen and that’s through incredible advanced planning work from our material and logistics teams and also just accelerating some of our inventory buy from these suppliers,” added Drake, noting for now the supply from Mexico chain is “stable.”
Drake also noted that Ford’s material costs also have been going up in recent years.
“But it’s important to note the beginning in ’21, this trend will be reversed as the material cost reduction starts to be delivered as the benefits of our modular architecture, the platform sharing and our best cost at Job 1 efforts are now manifesting themselves in these future product programs,” Drake said.
(Ford COO Farley shuffles executives to accelerate improvement.)
Drake said the material costs, along with that fresher product portfolio, is what is going to help contribute to that return to Ford to 10% margin in the North America business, which is one of the goals staked out by Jim Farley, who became Ford’s CEO Oct. 1.
