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Cooperation Urged in Auto Costs Fight

As a former Ford Motor Co. executive, Kathleen Ligocki knows about the carmakers’ mission to slash supplier prices. But in order to survive long-term, automakers must work with suppliers to take out the waste, said Ligocki, now chief executive of Tower Automotive. Speaking on an Automotive News World Congress panel Monday in Dearborn, Mich., Ligocki, a former vice president for Ford customer services, called for a collaborative effort between suppliers and carmakers to improve both sides’ bottom lines.

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From Detroit Free Presss

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DEARBORN, MI — As a former Ford Motor Co. executive, Kathleen Ligocki knows about the carmakers’ mission to slash supplier prices.

But in order to survive long-term, automakers must work with suppliers to take out the waste, said Ligocki, now chief executive of Tower Automotive.

Speaking on an Automotive News World Congress panel Monday in Dearborn, Mich., Ligocki, a former vice president for Ford customer services, called for a collaborative effort between suppliers and carmakers to improve both sides’ bottom lines.

Automakers have been hammering suppliers to cut their prices so automakers can improve their profit margins. But automakers that take that approach only get a short-term benefit because they haven’t helped suppliers lower their own costs, she said.

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“You do get a short-term boost if you’re a big automaker, if you beat on the table. That’s why they do it. The short-term approach doesn’t give the suppliers a chance to look at all the marbled-in waste,” Ligocki said in an interview with the Detroit Free Press.

Suppliers also have to strengthen their health and lower costs to compete with Asian manufacturers, who can sell their parts at cheaper prices than many U.S. companies.

Ligocki said the pricing pressures in the auto industry are the result of increasing competition between the automakers. Because the car companies have to constantly lower their prices to meet consumer demands, they have to seek savings on the prices they pay for their parts.

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“In the first place, the price pressures start with the consumers in the marketplace,” said Ligocki, who joined Tower in August. “How that price pressure is driven through the supply chain depends on the personality of the automaker and how much financial difficulty they have. Some of them do it gracefully. Some of them do it confrontationally because sometimes that’s what they’re facing in their marketplace, too.”

Tower, which is moving its headquarters from Grand Rapids, Mich., to Novi, Mich., has made bold moves in its relationships with the automakers.

More than a year ago, the maker of automotive body structures, frames and chassis modules, gave up a big frame contract with the Ford Explorer because Ford wasn’t paying enough for the parts. In the fall, the company warned that it wouldn’t meet its third-quarter expectations because of the lost business.

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And while Ligocki admits that suppliers cannot afford to take on business that doesn’t make enough money, she said that she might have handled the Ford frame business differently.

“I don’t think I would have done the same thing in the same position,” Ligocki said. “I’m not sure that all the discussions were done between Ford and Tower when that happened. If you have a good relationship with the customer, you may have been able to work things out farther along the line.”

Ligocki, who was a rising star at Ford, has her work cut out for her. The company competes with big players such as ArvinMeritor and Dana.

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Ligocki, however, said that the company’s outlook is becoming more favorable because of new business coming to it in the next few years.

The company will launch $1 billion in new products over the next three years, she said.

Copyright 2004 Detroit Free Press. All Rights Reserved.

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