Ford targets Slovakia for components

Ford Motor Company is scouring the Slovak auto components market for new suppliers. In July, the American car giant opened a Central European purchasing office in Prague to coordinate the company's sourcing activities in the region. The office is charged with identifying potential suppliers and working with them to meet the quality standards demanded by Ford. The opening of the office is part of Ford's strategy to purchase components where it is selling cars.
"We believe that the potential of the local industry is outstanding and represents the initiation of a long lasting partnership with the Ford Motor Company which will improve Slovak exports," said Ford Purchasing Manager Štefan Tyrpák.

Ford Motor Company is scouring the Slovak auto components market for new suppliers. In July, the American car giant opened a Central European purchasing office in Prague to coordinate the company's sourcing activities in the region. The office is charged with identifying potential suppliers and working with them to meet the quality standards demanded by Ford. The opening of the office is part of Ford's strategy to purchase components where it is selling cars.

"We believe that the potential of the local industry is outstanding and represents the initiation of a long lasting partnership with the Ford Motor Company which will improve Slovak exports," said Ford Purchasing Manager Štefan Tyrpák.

Slovak suppliers are attractive to foreign manufacturers not only for their low costs, but also because of a their expertise in metal working, mechanical engineering, machining, pressing, and casting. Products currently manufactured by Slovak suppliers include brake components, shock absorbers, sheet metal, tires, hydraulic system elements, clutches, ball bearings, transmission shafts, axles, and gearboxes. All components that Ford is looking for.

Ford is active in Central Europe, not only as a car distributor but also as a local manufacturer. The company assembles Escorts and Transit vans in Poland, and manufactures components in Hungary and the Czech Republic, employing over 4,500 workers region-wide. Components purchased in Slovakia will be exported to Ford's factories around the world. "The destinations will be primarily Ford vehicle assembly plants in Western Europe, mainly in the UK and Germany," said Tyrpák.

Ford isn't the only company scoping out the Slovak components sector. This year, Škoda, automobilova a.s. plans to purchase components from Slovak suppliers worth over 3.1 billion Sk ($ 91 million) , an increase of 14% compared to purchases in 1996. "At Škoda Auto Slovensko, an office was set up which supports suppliers in the preparation of their offers," said Günter Becker, head of purchasing at Škoda, automobilova a.s in the Czech Republic.

One shortcoming of many Slovak suppliers is outdated technology and quality deficiencies. "ISO has been established in quite a few locations, but there is still a lot to do to reach the QS 9000 status," said Tyrpák. In today's auto industry, "zero defects" is a standard requirement of the vehicle manufacturers. Investment into modern equipment and training is necessary to attain this level of quality.

This, of course, requires capital, something many Slovak suppliers are short of. In Poland, the Czech Republic, and Hungary, this shortcoming has been partially remedied by heavy foreign investment in the local component sector. Slovakia's poor foreign investment record is well known, and the auto components sector is no exception.

Those Slovak suppliers that do have the requisite quality often don't know their cost structure well enough to submit competitive price bids. "Most Slovak companies are not prepared to make good offers," said one major vehicle manufacturer. "We get quotes that are not good enough compared to Western European supplier prices. One would expect cheaper quotes."

Companies like Ford who plan to purchase components in Slovakia and export them back to the West will also face a customs mess. "I can't supply just-in-time from Slovakia," said an exasperated General Manager, of a German-owned components factory that exports product from Slovakia, through Austria, and into Germany. "Crossing two borders is impossible."

According to the manufacturer, getting parts past Slovak customs is difficult, but getting them through Austrian customs is even worse. "Austria is the outer border of the EU," he said. "It's stricter."

As of mid August, Ford has made contact with 30 Slovak suppliers, including Kinex, Sachs Trnava, VAP Prešov, Vegum Contitech, and Metalsint. In mid-October, Ford plans to organize a supplier conference involving over 150 Czech and Slovak suppliers. Purchasing executives from Ford's European operations will attend this event. "Ford will actively support the suppliers in developing their quality system," said Tyrpák.

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