According to Ford's Thai-Tang, “We really used this [lockdown] to help modernize our company, transform how we work, and accelerate the adoption of digital tools.” (Keith Tolman/VIS)

Hau Thai-Tang is engineering a new Ford

Ford’s product and operations chief talks about navigating microchip shortages, EV/AV challenges and driving engineering efficiencies amid the lockdown.

Security at Ford’s Dearborn Proving Ground was tight on a frigid January day when we arrived for SAE’s interview with Hau Thai-Tang. The gate guards were armed with infrared thermometers, and signs everywhere demanded masks be worn. Not even Bill Ford was permitted on site without a temperature check and PPE, we were told.

The reasonable and safe ground rules for our wide-ranging conversation with Ford’s chief product platform and operations officer included sitting 10 feet apart in an empty hall adjacent to the test track. We elevated our voices to cut through the mask muffling. A striking blue Mustang Mach-E provided a backdrop for talking electrification strategy. It also gave context for sharing his view of the other pandemic: the industry’s worsening microchip shortage.

“I just had a meeting with our global Supplier Council, our top 12 global suppliers,” noted Thai-Tang, who previously headed Ford global purchasing after more than 25 years in vehicle development. “This chip shortage is structural; it’s a fundamental imbalance between supply and demand across all industries.” The constraint, he explained, is happening four levels down in the supply chain – below the Tier-1s who provide the electronic controllers who buy the microchips from chip suppliers, who buy the silicon wafers from the wafer foundries.

“It’s very difficult for an OEM like Ford to call up a chipmaker or wafer supplier and say, ‘Tell me what’s happening with your production’ because they’ll say, ‘You’re not my customer – my contractual obligation is with the next tier,’” he said. The sourcing crisis forced at least eight vehicle OEMs to lose hundreds of thousands of units in production.

Ford estimated a 10 to 20% loss in 1Q21 output, hitting operating earnings by up to $2.5 billion, if this level of constraints continues through the first half of the year, the company said. The situation also sparked an ongoing blame game. Chipmakers fault the auto industry’s obsession with low inventories. OEMs and suppliers counter that semiconductor manufacturers have favored consumer-electronics companies because gadgets drive most of their profits.

“The timeframe from wafer manufacturing to OEM assembly plant is 26 weeks, on average,” Thai-Tang asserted. “We needed to look a half-year ahead to predict what the rebound was going to be.” Through the second half of 2020 many Ford suppliers were scrambling for parts because of intermittent COVID disruptions. When the chip shortages started, they assumed a similar cause, “and thought that with a bit of inventory and mix management they could recover,” he said.

What the industry didn’t recognize is when auto production shut down in spring 2020 because of COVID, causing purchase orders to dry up in the supply chain, the silicon wafer and chip makers basically reallocated their capacity to other industries that were growing. Consumer electronics benefited from people staying (and working) at home. Other trends such as 5G deployment also were driving up demand.

“They did what any good business would do – they optimized channel and mix, trying to get to the best profit optimization,” Thai-Tang said. His solution to avoid similar crises: Build genuine transparency across the value chain and gain more precise understanding of lead times. “The wafer foundries are highly capital-intensive, so those companies are reluctant to add incremental capacity if they’re not convinced of a sustained uplift in demand, for 12 or 24 months,” he said. While Thai-Tang is confident the supply-demand equilibrium will be achieved, the semiconductor shortage “will probably be with us for the first half of this year,” he said.

Prepping for unibody pickup
News of the chip shortage halting production at Ford full-size truck plants has overshadowed the company’s success with its expansive compact-unibody platform. C2, as it’s known, has turned out to be a milestone architecture with impressive “stretch.” It’s underpinned the Focus sedan, mainstream Escape/Kuga utilities, and brings surprising off-road capability to the recently launched Bronco Sport. The real measure of C2’s greatness – a compact unibody pickup – is in the near-term pipeline.

“C2 is all about the upfront planning – defining the bandwidth of eventual products that would use that architecture and making sure we account for it,” Thai-Tang explained. In moving to C2 from the previous C1, then Ford’s largest volume (about 2 million units globally) architecture, the company decided to eliminate its C/D platform, migrating the larger-size vehicles into the C2. The move was part of a strategy to slash Ford’s total number of vehicle platforms from 14 in 2007 to just five architectures today. “That mandated greater flexibility in ride height, wheelbase and width, as well as payload and off-road capability – the upfront work that enabled us to do products like Bronco Sport,” he said.

Thai-Tang’s predecessor as product-development chief, Derrick Kuzak, often reasoned that small pickups like the compact Ranger cost nearly as much to build as full-size trucks but earn far less margin. And unibody pickups, currently limited (in North America) to Honda’s Ridgeline, bring compromises. With just one combination of cab and cargo bed, “what you see is what everyone is going to get,” Thai-Tang acknowledged.

Without divulging detail about a future product, Thai-Tang set an encouraging stage for Ford rekindling the high-volume compact pickup segment that it once dominated. “We’ve certainly demonstrated the ‘Built Ford Tough’ capability with Bronco Sport, so that won’t be a compromise,” he said. “The success of [midsize] Ranger shows it’s not going to cannibalize F-Series. And, we need to have products that are more affordable. So, stay tuned,” he said.

Assembling another C2-based compact truck in Ford’s Hermosillo, Mexico, plant (unconfirmed at this writing) where Bronco Sport is built would bring cost savings in manufacturing scale and materials. There’s also shared engineering efficiencies in such a program, Thai-Tang noted. “From the first C2 Focus to the most recent product we’re working on, we’re seeing about a 64 percent reduction in engineering, tooling, and equipment,” he reported.

Charged on EVs
Of the five Ford vehicle architectures, the newest is dedicated to battery-electric vehicles (BEV) and underpins the 2021 Mustang Mach-E. Officially a utility, Mach-E was engineered with a smaller polar moment of inertia than is typical of long-wheelbase EVs carrying a large battery. Vehicles with long wheelbase are good for stability but not for agility said Thai-Tang, himself a skilled hot-shoe who began his career in vehicle dynamics and once headed Ford’s SVT performance operations. Mach-E breaks the mold in having the finesse of a smaller, lighter car – positive traits for the first shot out of Ford’s dedicated EV plant in Cuautitlán, Mexico.

With batteries, motors, power electronics still on the critical path of development (but generally riding a descending cost curve), EV technologies face hurdles similar to those of emerging combustion-engine powertrains more than a century ago. They’ll have to exceed expectations among the F-Series faithful. But the challenges are clearly outweighed by the opportunities, according to Thai-Tang.

“The product is much simpler,” he observed. “It’s less sensitive to environmental conditions such as altitude, thermal deltas and fuel quality. The complexities that are inherent in ICEs drive a lot of expense in terms of engineering and materials. And people often don’t realize new ICE platforms require an emissions certification every couple years. They require a lot of engineering over the life of the program and a lot of spending to keep them on the regulatory glidepath.

“By comparison, when you do a BEV, you’re done,” he stated. “You don’t have to worry about the emissions standard getting more stringent next year, because there are no tailpipe emissions. That represents a significant savings that we’re able to reinvest.” Continuous improvement in battery chemistry “is the big one, in terms of leveraging cost,” Thai-Tang said. “Engineers are already thinking about energy density and packaging as being much more a part of the vehicle architecture, with cooling capabilities integrated into it. And we can reuse the battery cells, power electronics and motors across platforms, to gain scale.”

Energy policy with R&D support
Relatively low hydrocarbon fuel prices in the U.S. are good for overall automotive sales on one level – and thus are key to funding EV and automated-systems development. But arguably they serve as a deterrent to widespread adoption of electric vehicles. “The way we look at it is, low hydrocarbon fuel prices frankly put the onus on us as an OEM to accelerate the cost improvements in electrified vehicles – to accelerate their adoption and also the crossover between electrified products and internal combustion engines,” Thai-Tang said. He noted that while the industry cannot control the price of fuel, Ford uses it as a forcing function to the progress still to be made with EVs.

Would EV purchase incentives from the government be preferable to raising gasoline taxes? “We think that until we reach a cost parity [of EVs and ICEs] that any support the federal government can give us in terms of energy policy will certainly help us speed up the adoption,” he said. That includes R&D and advanced technology support, as well as incentives to improve the EV charging infrastructure and investing in the value chain in the U.S.

“From a geopolitical standpoint there is going to be some risk if the majority of the global battery supply is coming from Asia,” he said. “It’s going to be very important to accelerate the incentives for us to localize battery production in the U.S., but also the technology shift to solid-state batteries.”

AV systems: make vs. buy
While the public and media’s enthusiasm for most modes of ride sharing and public transit was shaken in the wake of COVID, Ford’s efforts with Argo AI and Ford AV LLC are steadily progressing toward safe and practical SAE Level 4 autonomy as a business model for moving people and goods. But the company is growing its capabilities in SAE Level 2 and the enhanced L2 automated systems popularly dubbed “Level 2+,” Thai-Tang explained. Over-the-air updates for the CoPilot 360 suite and other key vehicle features on the way are “first steps” aimed at adding incremental functionality over the life of vehicle ownership.

In the commercial vehicle sector, “it’s not so much about replacing the driver but increasing productivity,” Thai-Tang said. He noted that Ford completed an AV benchmarking project with John Deere that provided “really powerful” learnings regarding the value of vehicle automation in the com-vec space. And the company’s past experience in systems outsourcing, particularly in cabins/cockpits, then reverting to insourcing, is enabling it to reflect on the optimal make-buy decisions as AV technology matures. 

“It typically plays out in cycles,” Thai-Tang noted. “Initially, the turnkey suppliers that can deliver a full L2 automated driving system will be very successful. There are examples of companies doing that. But after that first generation, the larger OEMs will want to control their own brand experience, and gain efficiencies as they deploy that technology across multiple programs. And, not have to pay the upfront engineering cost to those Tier-1 suppliers.

“You’ll hear the OEMs say, ‘We don’t want you to be a full systems supplier; we only want to buy cameras or radar or processors from you and we’ll do the integration so we can get the re-use and scale benefits,” he said. “We’re at that point now where we’re seeing the larger OEMs bringing that work in house – just buying the components and doing integration themselves. Smaller OEMs, however, who don’t have the budget will continue to buy turnkey solutions. We saw this sort of trend happen with interior cockpits.”

At Ford, decisions of “make vs. buy” are determined by what is truly customer-facing and brand-differentiating. “And if so, we should do it ourselves,” Thai-Tang asserted. “In many cases we have greater know-how and efficiency than the supply base.” But he added that the landscape of what used to be considered brand-differentiating is changing.

“When I started my career in vehicle dynamics, steering was a differentiator. But now, I can’t remember the last time I drove a vehicle that made me think, ‘Wow, this steering is terrible!’ They’re all really good today, so steering is not really a brand differentiator for most customers anymore. Only expert drivers can detect the subtlety of on-center precision or how linear the yaw response is.

“So, should I still be investing in steering systems in-house and hiring vehicle dynamicists, or should I be hiring software engineers to work on connectivity and large-screen clusters – which are the new battleground in brand differentiation and customer experience?”

COVID productivity boost
Engineering execs across the industry have observed productivity improvements in their organizations during the COVID lockdown. For Hau Thai-Tang and Ford, it is no different. “There’s an old saying in business: Don’t waste a crisis!” he remarked. “We really used this [lockdown] to help modernize our company, transform how we work, and accelerate the adoption of digital tools. Before COVID we were already thinking about how we wanted to work differently in the future. Part of that was leveraging virtual collaboration tools. That work helped us in making the transition to working at home.”

Thai-Tang keenly monitors various Ford KPIs (key performance indicators) on a weekly basis to track productivity. These might include the number of surfaces being released out of the design studio, or how many engineering-change requests are being processed, or how many CAD drawings are being released. “We’ve seen an increase in productivity that validates the transition; the data look good,” he said. “The virtual collaboration tools have helped. But frankly the teams are spending less time traveling to and from work and we were forced to really empower the teams.”

Ford also made “a concerted effort” to reduce bureaucracy and reduce the number of meetings across its engineering groups, Thai-Tang said. “That’s paid off in our product launches with F-150 (in two plants) plus Mach-E and Bronco Sport. And we did it with good quality and hitting our launch volume curves. The teams were able to do that with the majority of them working from home. We’ve had engineers take vehicles home to modify parts in their home garages. They’d meet in shopping mall parking lots to hand prototype vehicles off to colleagues. Our employees have been very resilient, innovative and creative in how they’ve modified the work pattern.”

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