OMG... Ford Motor Company Admits They Are Just An OEM...

I was just watching Ford's CEO Alan Mulally on CNN... Ford is actually doing fairly well, and doesn't need much of the bailout money, so a lot of people were confused about why he would stick up for GM or Chrysler went bankrupt. At first glance, you think it would be great if your competition went bankrupt, because then you could gobble up their market share... but Ford was actually very concerned.

Initially, I suspected something of an old-boys-network thing. Mulally is sticking up for other Detroit car companies, simply because they need to stick together if one of them needs to go to Washington to ask for help against Japanese or German car companies... so it might be just cynical, political self interest.

Mulally's explanation was oddly different...

He stated that the majority of the auto industry is in the suppliers, not the auto makers. Since all auto companies use the same suppliers, and suppliers are hurting as well, then one bad company puts the whole thing at risk.

For example, if GM goes bankrupt, then Delphi might go bankrupt, and not be able to supply parts to Toyota, Ford, or Volkswagen. That puts them all at risk if a company as large as GM goes bankrupt.

What shocked me was that during the interview, Mulally called his own company an "original equipment manufacturer!" This is a common term in both software and manufacturing, usually shortened to just OEM. It basically means Ford doesn't manufacture anything; it wraps pre-manufactured products with its own brand. They don't make engines, doors, wheels, brakes, transmissions, or pretty much anything anymore... they just slap together other people's stuff, put the word "Ford" on it, then sell it through their distribution channels.

I was wondering how long it would take them to admit this... and how folks would react... The CNN guy just brushed it off as "auto company speak," so I don't think they actually understood what Mulally meant.

Cringely brought this up a few weeks ago in his article What if Steve Jobs ran one of the Big Three auto companies? He suggested the same thing... Car companies should act more like Apple: let other companies do the dirty work of creating the "parts," then focus the big 3 on design, sales, marketing, and customer services. The whole article is very good, I recommend reading it.

Hearing Mulally openly admit that Ford is nothing but an OEM is very telling... and it gives me hope that some folks in Detroit "get it," and might actually be able to turn around the industry... but it might take a while longer for the folks at CNN to "get it."

I don't think Ford wants

I don't think Ford wants their competition to go into bankruptcy because it would their competitor's some financial advantages over a company that pays its debts. The same thing happened in the airline industry. Once a few were in, it started a domino effect. Only Southwest, I think, has proven financially strong enough to avoid going that route.

Re: I don't think Ford wants

good point... a company in bankruptcy protection gets a bit of breathing room... although the problem is that you have a bankruptcy judge sticking his nose in your business all the time.

old news

I wouldn't think this statement would be very surprising to many consumers. It's like calling Dell a "computer manufacturer" with the Maxtor hard drive and the Intel Motherboard and the NVidia graphics Card and the...well you get the idea. All complicated machines are really just an assembly of smaller parts. I can't think of a single company that actually manufacturers the complete machines they sell? From making glass to molding plastic to forging metal? The only reason it's even remotely shocking in the auto industry is because many of the designs are also reused. How many times have you seen a car pass by and think "Hey, is that a (insert American brand here) or a (insert foreign brand here)". Consumers like to think they are "buying American" but that can mean different things for different people. If the car is "assembled" in America does that count, even if all the parts come from China?

Most manufacturing itself comes from China and they export parts all over the world.

I would be curious to hear about any companies that truly manufacture 100% of any complex device or machine?

Snow blower, lawn mower, chain saw, ATV, RV, sailboat, blender, washing machine?

I've never heard them ADMIT it before

also... it wasn't really the case until a few years ago. GM spun off Delphi about 10 years ago, but it didn't become the parts supplier to so many car companies (foreign and domestic) until fairly recently. The culture is still there, tho...

Detroit loves the illusion that American cars are "American." They don't want you to learn that Toyota employs more auto workers, and builds more cars in the US, than ANY of the big three. They don't want you to think of "Ford" as just a brand... because who would bail out a brand?

Its old news to folks in the manufacturing business... but I'm surprised they let the general public hear it.

OEM

Mulally was using the term OEM in it's original meaning - that Ford assembles the final product, rather than being a manufacturer which makes only parts. ALL auto companies are OEMs, and there isn't a single manufacturer in the world that makes all of its own parts. In fact, it's always been this way, even more so in the early days of the auto when most of these companies couldn't possibly have conceived of building a separate factory for every part they needed.

In the late eighties, I went to get a rear view mirror for my Escort, and I was surprised to find that the same mirror was being used by Chrysler, Honda, GM and a couple of other companies.

It's really not that big a deal.

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