Re-Engineered

Small British suppliers threatened as Ford drives for profits and urges parts makers to switch production to countries with lower labour costs. Clayton Hirst reports

Ford Motor Company is turning the screw on its European suppliers by urging them to consider moving production to countries with lower labour costs.

The world's second-largest car maker wants to engineer a new way of sourcing components, which will see it buying more from India, China, Russia and Turkey. But the move could threaten hundreds of engineering companies in Britain.

A spokesman for Ford said: "To fulfil our demands in terms of cost and quality, we are developing high-quality suppliers in new markets. This is a chance for our existing suppliers to produce parts in emerging markets. We are asking them to look at opportunities there."

The switch is part of Ford's plan to cut $9bn (£5.4bn) in costs by 2005.

A spokesman for the Society of Motor Manufacturers and Traders said: "Rather than affecting the multinational suppliers, it will affect businesses based, for example, in the West Midlands, which don't have international operations."

There are around 7,000 sites in the UK which supply to the automotive sector.

Companies such as GKN, the engineering and defence giant, are unlikely to be hit by Ford's plans. GKN supplies components to Ford's Transit factory in Southampton. But because it has operations in 30 countries, it can easily switch production to suit demand.

Lance Doughty, vice-president of the automotive team at Cap Gemini Ernst & Young, said this could force many British engineering firms to merge. "Over time the smaller component companies will come under increased pressure to sell out, become part of a bigger group, or specialise. If you make, for example, brake components and are up against an emerging markets company that can manufacture at 30 per cent of the cost, then you just can't compete."