Q1 2nd Edition

April 24, 2003

2

SETTING THE STANDARD

nd Edition

Ford Confidential UNCONTROLLED COPY

Insert Photo of Tony Brown

Q1 was built upon previous guidelines and has incorporated the lessons learned from years of quality experience. Now, one-year later, we have enhanced Q1 based upon supplier and Ford feedback to drive continuous improvement and customer satisfaction. Q1 has been refined to address the needs of supplier partners and customers in our pursuit of quality excellence. The relationship we hold with our suppliers is of key importance as we work together to produce quality vehicles and drive customer satisfaction. Q1 lets our suppliers understand exactly where they stand and helps lead the way to achieve continuous improvement. The reward for improving quality and maintaining Q1 status is the recognition that the supplier's facility is the best in the business. The symbol of this excellence is the Q1 flag that is flown proudly over the best supplier facilities in the world. Our Q1 suppliers are valued partners, an integral part of our business fabric. Only by working in partnership will we be able to provide the high quality products our customers expect. The Q1 journey, like the quest for excellence itself, never ends. We appreciate that you have continued the journey with us. Tony Brown Ford Motor Company, Vice President, Global Purchasing May 2003

April 24, 2003
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Q1 2nd Edition Ford Confidential

C O N T E N T S

• Introduction 2

• 2nd Edition Summary of Changes 3

• Q1 Requirements 5

• Q1 Score 7

• Consequences 8

• Benefits of Q1 9

• Applying for Q1 10

• Appendix A – Capable Systems 12

• Appendix B – Ongoing Performance 13

• Appendix C – Manufacturing Site Assessment 16

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INTRODUCTION Q1 was launched in February 2002 and is delivering results. By recognizing quality achievement at the manufacturing site level, and by applying consistent, understandable metrics to drive high quality, Q1 has become the quality trustmark worldwide for each brand name. But in today's dynamic marketplace, companies that don't improve get left behind. The expectations and requirements in Q1 have been refined to more accurately reflect supplier performance in relation to the total Ford enterprise. What Is Q1?: It is a set of fundamental quality and manufacturing disciplines which, when followed, ensure a supplier's success and drive a supplier's continuous improvement. Suppliers are expected to attain a certain mark, put the tools in place to maintain excellence, and to improve with each passing year. Suppliers aren't expected to achieve Q1 independently – it is a relationship. Ford stands ready to offer suppliers its expertise and assistance throughout the Q1 quality journey. Q1 puts the discipline in place to achieve consistent excellence and guides cooperation between Ford and its suppliers for superior quality execution. Approach: Q1 applies a few vital metrics to determine which suppliers qualify for Q1 – the same measurements will be used to establish who will keep Q1 status. The 2nd Edition Q1 has refined the manufacturing site assessment as a key tool in driving continuous improvement. The revised site assessment places greater emphasis on the site QOS, including warranty performance, launch performance, quality reject trends and process variability to provide a framework to achieve continuous improvement. Summary of Changes: The 2nd Edition Q1 requirements are effective June 1, 2003. A summary of the content changes is provided in the next section.

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hat's Changed

Commodity PPM Performance (production and service) The threshold for commodity PPM performance has been revised:

A) The industry commodity PPM has been revised to a 12-month fixed PPM from today's floating monthly industry commodity PPM. The industry commodity PPM will be fixed at the beginning of each calendar year.

B) The process for deducting points from suppliers for poor performance to the industry commodity PPM has changed.

Sites whose commodity PPM exceeds twice the industry PPM will lose 150 points vs. 250 points today. If the site commodity PPM exceeds the industry commodity PPM in any month for any commodity during the next five months, the site will lose 250 points and Q1 status (the PPM maximum threshold rule does not apply, refer to 1C below).

C) The overall site PPM maximum threshold has been reduced to 110 PPM (from 120). Suppliers will receive negative points based on the scoring table when the commodity PPM exceeds 110. Sites with commodity PPM lower than 110 will not receive negative points but may receive positive points for commodity PPM.

Six-month Site PPM (production only) Sites will no longer receive negative points when 6-month PPM exceeds 100. Low-volume site PPM (production only) If a site ships fewer than 40,000 total pieces in the mature six-

month reporting Responds to supplier concerns period, it is considered under the low-volume rule. The site will not receive that the PPM calculation was negative points for PPM performance if it ships fewer than six rejected pieces in the six-month period. Low volume sites are eligible to receive positive points for good PPM performance.

Stop Shipment Waiver (production only) The stop shipment waiver criteria have been revised to clarify. Suppliers who assist Ford by alerting the Ford Plant to a potential issue before part utilization and replace suspect parts with certified stock will be considered for the waiver.

Site Assessment (production and service) The partial site assessment addressing focus elements has been eliminated for all suppliers. Site self-assessment frequency is based on Quality segmentation. Full site assessments are required as follows:

• Segment 1 and 2 sites every 6 months • Segment 3 and 4 sites every 12 months

The site assessment scoring impact on Q1 has also been revised and now supported by a two-step process at the discretion of the Ford site engineer.

Rationale Provide suppliers with a stable target for PPM performance. Allow suppliers to react to a significant PPM event without losing Q1 for a single event. Designed to respond to the demands of the marketplace by requiring year-over-year improvement in key performance metrics. Addresses supplier's concerns. Responds to supplier's concerns that the PPM calculation was overly sensitive for low-volume sites.

Recognize sites who proactively communicate potential concerns to the Ford plant and STA prior to plant disruption. Provide Ford and suppliers more flexibility in responding to issues.

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Summary of Change (continued)

What's Changed

5. Site Assessment (continued) The process will be triggered by:

• Site assessment is late to the required 6 or 12 month frequency

• Corrective action plan is not submitted to the Ford STA site engineer within 30 days of the site assessment

• Site action plan is ineffective in its execution The first STA action will result in –150 points, the second STA action will result in –250 points and loss of Q1 status.

6. Violation of Trust (production and service) Due to the importance of trust in Ford and supplier relationship, any violation of that trust could result in revocation of Q1 status. Violation of trust is discussed in more detail in Appendix B.

7. Plant Endorsement (production only) If a Ford plant rescinds its customer endorsement from a supplier site for Q1 criteria violations or 6-month QR trend performance, the supplier is required to submit a corrective action plan to its STA site engineer.

8. Service – Ford of Europe Add service PPM and delivery for product to FCSD Ford of Europe receiving locations.

9. Warranty Performance (production only – 3rd quarter 2003) Specifics for site warranty are being finalized around annual improvement in the percent of warranty claims per parts shipped. Suppliers are expected to demonstrate knowledge of the warranty impact of their parts on Ford vehicles.

10. Launch Performance (production only) Launch performance is included in the site assessment. Sites are required to meet program launch requirements, including responsiveness and closure of any launch readiness issues, in a agreed upon timely manner. Failure to meet launch requirements can result in loss of 250 points and Q1 status.

Rationale Trust is the foundation of the Ford and supplier relationship. It is essential to the integrity of the Q1 trustmark. Reinforce importance of customer endorsements and site ongoing performance to Ford Plants.

Align with Ford of Europe strategy. Key part of the revitalization plan. Align Q1 2002 to the flawless launch execution requirement.

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Q1 REQUIREMENTS Any external supplier manufacturing facility which currently supplies production or service product to Ford is eligible for Q1 consideration. Subcontractors are not eligible for Q1status. Q1 means that the supplier facility achieves excellence in these key areas: capable systems, ongoing performance, site action plan, customer endorsement and continuous improvement. Capable Systems What are the capabilities of a supplier's underlying systems?

Q1 evaluates this aspect of business by your registrar third-party 'in good standing' certification to QS-9000 or TS 16949 quality standards, and the ISO 14001 environmental standard. Suppliers must also pass a MS 9000, MMOG, or Odette materials management system assessment. Compliance to these standards are required to get and keep Q1 status and are discussed in more detail in Appendix A.

Ongoing Performance What is the supplier's performance history with Ford? Q1 uses five key performance metrics in determining a supplier's Q1 score:

Field Service Action: Has Ford had to take action to intervene because of a supplier failure? Stop Shipments: Is vehicle rework, modification or reinspection necessary due to poor product availability or quality? PPM Performance: Does a supplier deliver consistently high-quality products? Delivery Performance: Do products arrive on time, at the correct location, in the proper quantity and with the correct information? Violation of Trust: Does a supplier properly notify Supplier Technical Assistance (STA) of changes in manufacturing process, equipment, material and sub-supplier changes?

Q1 reports these metrics as part of the Supplier Improvement Metrics (SIM) system. Suppliers can look up their Q1 status (updated daily) and their overall score (updated monthly), in their SIM summary report. The Q1 performance metrics are discussed in more detail in Appendix B. Q1 suppliers are responsible for the total quality of the goods and services they provide to Ford. This means that Q1 suppliers are responsible not just for their own sites, but for the quality of any product which a subcontractor manufactures.

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Q1 2nd Edition Ford Confidential Manufacturing Site Assessment How do things measure up on-site? The Manufacturing Site Assessment evaluates whether the supplier is performing up to customer expectations. Q1 suppliers will perform a site assessment as follows:

• Quality Segment I and II every six-months Refer to the site summary page in SIM

• Quality Segment III and IV every 12 months

The Site Assessment determines if the site satisfies Q1 requirements and will identify any opportunity for improvement. Are systems and processes still operating at the same high level as when the supplier achieved Q1 status? Have performance or manufacturing process capabilities advanced in order to meet or exceed new market expectations? The Q1 site assessment addresses:

Planning and Demonstration of Manufacturing Process Capability: What is a given facility capable of ? Have they planned to best leverage its manufacturing and quality potential. Variability Improvements (Consumer Driven 6 Sigma): Does the manufacturing process demonstrate ongoing variability reduction on current business? Does a supplier plan introduction of variability reduction techniques for new programs?

Manufacturing Efficiencies: Does the supplier exhibit a systematic approach to lean manufacturing for current parts? Are surrogate data, First Time Through (FTT) and Overall Equipment Effectiveness (OEE) used to improve new programs? Has the supplier achieved lean manufacturing improvements on current business? Customer Satisfaction: Has the supplier achieve customer satisfaction improvements on current business and are these improvements documented in robust Quality Operating System (QOS)?

On a case-by-case basis Ford STA may also conduct formal re-evaluation of a supplier's Q1 status. This review is influenced by historical quality performance, recent product launch concerns and potential impact on overall customer satisfaction. A detailed discussion of the Manufacturing Site Assessment is provided in Appendix C.

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Q1 2nd Edition Ford Confidential Customer Endorsement Are the supplier's customers satisfied with the service and quality they receive?

Each supplier must obtain customer endorsements proving it consistently meets the needs of its Ford customers. Each Ford plant that receives a supplier's products, as well as Material Planning & Logistics (MP&L), Supplier Technical Assistance (STA), and Ford Customer Service Division (FCSD) for service parts, must provide the supplier with an endorsement. Ford plant endorsement is solely based on a site's most recent performance in the immediate prior six-months to the following criteria:

• No stop shipments with any supplier responsibility • Commodity PPM is less than 150% of the relevant industry commodity PPM • Delivery rating (weighted average) of 81 points or higher • Six-months QR trend shows improvement or flat trend • Site action plan is not effective in addressing manufacturing quality concerns

Ford plants may withdraw their endorsement based on site performance above. The Ford plant will document the basis for their decision and will discuss their rationale with STA prior to supplier notification. Loss of any customer endorsement is entered in the Manufacturing Site Assessment. The site is required to submit a corrective action plan to STA within 30 days of the loss of the endorsement. Continuous Improvement Are suppliers getting better each year? The ability to drive continuous improvement is built into Q1. To maintain Q1 status, suppliers must embrace continuous improvement. With this in mind, the Q1 thresholds for performance metrics and site assessment may be raised to encourage overall continuous improvement. In the final analysis, the automotive customer of tomorrow will demand and accept no less.

Q1 Score

Q1 Score = Capable Systems + Ongoing Performance + Manufacturing Site Assessment

How are Capability, Performance, and Manufacturing Site Assessment tabulated to arrive at a final score?

• Q1 Score: Suppliers must maintain an overall score of at least 800 points for Q1 status. Every site begins with a 1,000 point Q1 score.

• Capable Systems: Sites must maintain certification to QS-9000/TS 16949, ISO 14001, and compliance to MS 9000/MMOG/Odette (Appendix A).

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Q1 Score (continued)

• Ongoing Performance: Sites gain or lose points based on their performance metrics and must perform to the minimum Q1 scoring thresholds (Appendix B).

• Manufacturing Site Assessment: Site must meet all Q1 manufacturing requirements and

implement an effective corrective action plan. The site will use the latest site assessment checklist available on the Ford Supplier Portal (FSP) at https://web.bli.ford.com

Sites that do not meet Q1 requirements, or fail to perform ongoing manufacturing site assessment at the required frequency or fail to implement an effective corrective action plan, will lose 250 points and may lose Q1 status. This applies whether the site is a new supplier or an existing Q1 location that wishes to keep Q1 status in 2003 and beyond. CONSEQUENCES

Revocation of Q1 A supplier's overall Q1 score will be updated monthly to reflect the most recent six months of mature data. Suppliers must maintain a minimum of 800 points. Certain situations may result in a recommendation to revoke a supplier's Q1 status:

• Loss of certification to ISO 14001, QS-9000 or TS 16949 • Field Service Action with any supplier responsibility • Two or more stop shipments with supplier responsibility (Q1 impact may be waived

if the supplier demonstrates proactive intervention and the suspect component has not been used in Ford production and the underlying root cause is resolved in a timely m anner, as agreed by STA)

• Monthly commodity PPM exceeds any relevant industry commodity PPM in any of the five forward months after the six-month commodity PPM exceeds the industry commodity by 100%, with the site PPM is greater than 110

• Delivery rating falls below 81 points • Manufacturing site assessment is delinquent, or the corrective action plan is delinquent

o r ineffective in execution

• Violation of Trust (refer to the 2nd Edition change summary and Appendix B) • Overall Q1 score falls below 800 points

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Consequences (continued) If a supplier has not satisfactorily addressed the performance or customer satisfaction problem, the supplier's Q1 status will be affected. These situations cannot be offset in the Q1 score by positive performance in other areas. STA will make the final determination on supplier Q1 status. To regain Q1, the supplier must satisfy all requirements for six consecutive months, and obtain STA and customer endorsements, as appropriate. BENEFITS OF Q1 Your Q1 status has many benefits, most importantly, membership among the industry's elite, with the associated respect and rewards:

• Recognition: Flying the Q1 flag and displaying the Q1 plaque is a sign that your facility stands shoulder to shoulder with the best suppliers in the world.

• Publicity and Advertising Privileges: Q1 status will enable you to advertise and publicize your company with the additional prestige of Q1. Suppliers are required to obtain approval from Ford Public Affairs as a prerequisite of use.

• Self-Certification: As a Q1 supplier, you will be eligible, with STA concurrence, to self-certify to the PPAP requirements of QS-9000 and TS 16949.

• World Excellence Award: As a Q1 supplier you will be eligible for this award, which acknowledge the best of the best.

• Preferred Status with Ford: Only Q1 facilities are considered for new product development and sourcing.

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APPLYING FOR Q1 Ford Supplier Technical Assistance (STA) will help you through the Q1 process. The first thing you'll need to do is contact your Ford STA site engineer. The STA site engineer will then guide you through the steps necessary before you can make a formal Q1 application. For example:

• Is your site eligible for Q1 status? • Who are your Ford assembly and manufacturing plant customers for Q1 consideration?

• What is your classification: a new supplier, a new manufacturing site of an existing supplier, a manufacturing site attempting to qualify initially for Q1 status.

• What Manufacturing Site Assessment process will be used – Ford STA or self-assessment?

Your facility will conduct a self-evaluation to ensure that you meet Q1 criteria. Once you believe your facility is ready, based on the site performance reported in SIM, the next step is to obtain the necessary customer endorsements. These endorsements are valid for six months from the date of the signature on the endorsement documents. The next step in the Q1 process is formal application to Ford STA. When your self-evaluation shows your site to be up to Q1 standards, and you have collected the necessary customer endorsements, notify your STA site engineer in writing, along with documentation of your certification to TS 16949 (or QS-9000 until December 14, 2006) and ISO 14001, and compliance with MMOG (or MS-9000, Odette). Ford STA will take it from there. A Q1 on-site evaluation may be scheduled to review your qualifications for Q1. The responsible STA manager will provide a final recommendation based on demonstrated site capabilities, performance metrics, manufacturing site assessment and the overall Q1 points maintained during the prior six months of mature data.

Administration Suppliers must have at least six consecutive months of production or service shipping history. If a supplier location has not shipped to Ford within the prior twelve months it is considered inactive and is no longer considered to meet Q1 requirements.

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Administration (cont.)

Q1 is a Ford-exclusive designation. Facilities that no longer ship to Ford may not advertise their Q1 status or fly the Q1 flag. For external production suppliers, Ford Purchasing Supplier Technical Assistance (STA) administers the Q1 program globally. For suppliers of service products, the responsible FCSD quality activity administers the Q1 program globally. On-line Availability This document and information relating to Q1 are accessible to suppliers on the Ford Supplier Portal (FSP) at https://web.bli.ford.com.

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APPENDIX A CAPABLE SYSTEMS: Basics Before a supplier is considered for Q1, it must demonstrate system capability in several areas. These capabilities must also be maintained for the supplier to keep Q1 status. ISO 14001 – Environmental Management System Ford has led the way in the automotive industry by becoming the first automotive manufacturer to certify its global manufacturing facilities to ISO 14001. Q1 suppliers share a key role in our environmental commitment and efforts toward continuous improvement. All existing Q1 supplier-manufacturing sites are to be third-party certified to the ISO 14001 standard by July 1, 2003. Sites which are not certified at that time may lose 250 points and Q1 status. New suppliers and suppliers re-instated to Q1 status must be third party certified to ISO 14001. QS-9000 – Quality Management System TS 16949 – Supplier Quality System As one of the key stakeholders, Ford participated in the development of QS-9000 in response to supplier requests to harmonize supplier quality requirements and assessment documents with other automotive manufacturers. QS-9000 and TS 16949 provide a framework of fundamental quality systems that enable continuous improvement and emphasize defect prevention and the reduction of variation and inefficiency within the value chain. Q1 suppliers are required to be third-party certified to QS-9000 or TS 16949. Sites which are not certified will lose 250 points and Q1 status.

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MS 9000 – Material Management System Requirements MMOG – Materials Management Operations Guideline Ford developed MS-9000 and MMOG to drive the use of fundamental material management systems and processes that result in outstanding delivery performance, exceptional customer satisfaction and continuous improvement. Q1 suppliers are required to submit an annual self assessment indicating compliance to MS-9000, MMOG or Odette (Volvo). The appropriate self assessment summary must be entered via GSDB on-line by August 1st of each year. As before, random on-site reviews of supplier compliance will continue. If a supplier is found to be out of compliance and its corrective action plan does not meet MP&L requirements based on effectiveness and timeliness, Q1 status may be jeopardized. APPENDIX B Ongoing Peformance: Scoring Thresholds Every supplier site starts with a Q1 score of 1,000 points. Based on calculations in the five metric categories which reflect the most recent six mature months of data, the sites then gain, or lose points, according to their performance. Suppliers must have a minimum of 800 points to. For example, if a supplier has any responsibility in a Field Service Action, the site loses 250 points, the Q1 score drops to 750 and Q1 status is revoked. Some categories, like Stop Shipment, have specific thresholds. A supplier must measure up to those thresholds in order to maintain Q1 status Certain categories, like Parts Per Million (PPM) performance are measured on a sliding scale. If suppliers achieve or outperform PPM targets, they gain points, according to the extent by which they outperform expectations. If they miss the mark, they lose points accordingly. As part of Q1's commitment to continuous improvement, both the baseline threshold to achieve Q1 (800 points), and the thresholds necessary to succeed in each category and retain Q1 status, will increase as time goes on.

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Field Service Action (0 or -250 points)

Directly impacts Customer Satisfaction and Brand Image When Ford must intervene with a Field Service Action in which the supplier has responsibility, or the supplier has involved Ford in a Field Service Action due to their own actions, the supplier site loses 250 points and Q1 status. Stop Shipment (0 to –250 points)

Directly impacts Customer Satisfaction If Ford experiences two or more Stop Shipments, the supplier loses 250 points and Q1 status. Q1 impact may be waived if the supplier demonstrates proactive intervention, the suspect component has not been used in Ford production and the underlying root cause is resolved in a timely manner, as agreed by STA. PPM (+ 100 to –250 points)

Provides incentive for continuous improvement, increasing Customer Satisfaction Site PPM: A site can gain positive Q1 points by achieving 60 or less overall PPM for both production and service site PPM. A site will no longer lose points for site production PPM performance; negative points still apply for site service PPM performance. Commodity PPM: A supplier can gain positive Q1 points by outperforming the industry commodity PPM. If a site provides multiple commodities, it will only receive points for the worst performing commodity for production and for service, respectively. Negative points are only assigned if the site PPM is greater than 110. Sites can receive positive points when they outperform the commodity PPM. Should a site's six month commodity PPM level, for either production or service, exceed the ongoing industry commodity PPM by 100% or more, and the site PPM is greater than 110, the site will lose 150 points. When this situation occurs, the site commodity PPM cannot exceed the monthly industry commodity PPM in any month for any commodity during the five subsequent months, regardless of customer, or the site will lose 250 points and Q1 status. The industry commodity PPM level will be locked for 12 months based on the prior 12-month industry PPM for each low commodity for both production and service. To gain or lose points for PPM performance, suppliers must have shipment activity in two of the prior six months. Suppliers to FCSD must have reject activity in four of the prior six months to lose 250 points and Q1 status.

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PPM (+ 100 to –250 points) continued Low-volume rule: If the six month overall site shipment for production is less than 40,000 pieces and the site has five or fewer rejected pieces, it will not receive negative points for either commodity or site PPM performance. A supplier can receive positive points when they outperform industry commodity PPM or they achieve 60 or fewer PPM. The low-volume rule applies only to production shipments. PPM points are determined as indicated in the Scoring Thresholds table (Page 12F).

Delivery Rating (+ 100 to –250 points) Drives excellence in communication and shipping performance A supplier can gain positive Q1 points for both production and service delivery performance based on the weighted six month average delivery rating. Suppliers must have shipment activity in at least two of the prior six months to gain positive points for delivery performance. If a site receives multiple production or service delivery ratings, it will only receive points for the worst production and service ratings, respectively. If a supplier's production or service Delivery Rating falls below 81 points for (i) the weighted six-month average, (ii) for the last 2 mature months and (iii) for the current month, the supplier will lose 250 points and Q1 status. Should a supplier's weighted six month average delivery rating fall below 81 points, and there is no shipment activity in either the current month or one of the last two mature months, the site will receive zero points. Delivery points are determined as indicating in the Scoring Thresholds table (Page 12F)

Violation of Trust (0 or –250 points) Drives integrity and trust essential to the Q1 relationship If Ford Supplier Technical Assistance (STA) determines that a supplier has committed a Violation of Trust, it will lose 250 points and Q1 status. A Violation of Trust occurs when a supplier fails to notify STA and obtain approval through the Supplier Request for Engineering Approval (SREA) process for:

• Manufacturing or equipment process change (including tooling) or location change • Component or material change or substitution • Subcontractor or vendor change

Other examples of Violation of Trust may include:

• Launch ramp-up or rate of climb which adversely impacts plant build schedule versus the agreed timing

• Self-certified PSW is incomplete or inaccurate • PSW supporting data lacks integrity • Other trust issues which severely impacts the ongoing business relationship with Ford

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Q1 2nd Edition Ford Confidential Warranty Performance (TBD points) Drives excellence in Customer Satisfaction and Brand Image Warranty performance is measured on the basis of annual improvement in repairs per parts shipped. A supplier can gain or lose Q1 points for demonstrated changes in warranty based on monthly warranty claims relative to the site's overall Ford business. Warranty performance will be incorporated as part of Q1 scoring later in 2003, when site warranty data is reported in SIM (2003 rollout will impact US/Canada vehicles only). Suppliers must demonstrate knowledge of the warranty impact of their parts on Ford Motor Company vehicles. Warranty metrics should be integrated in the supplier's QOS along with roadmap actions to deliver significant year over year improvements. In addition, suppliers must have plans in place to monitor low time in service warranty to detect and to correct emerging customer concerns. Suppliers should utilize available warranty tools, such as the Analytical Warranty System (AWS), SIM Warranty (available 2nd Quarter 2003), and regional warranty parts return centers. In addition, suppliers are strongly encouraged to participate in existing warranty improvement efforts through Ford engineering

APPENDIX C

Q1 – MANUFACTURING SITE ASSESSMENT Principle: The Manufacturing Site Assessment defines Ford quality requirements and is a key component of Q1. The assessment reviews the fundamental areas of the supplier quality system by evaluating how well the site has planned for and demonstrated manufacturing process capability. Suppliers must demonstrate these fundamentals based on objective evidence in order to achieve and keep Q1. Satisfying the fundamental areas of the quality system is essential to delivering manufacturing efficiencies, variability reduction, and ultimately customer satisfaction. These areas are the basis of continuous improvement around which Ford and the supplier manufacturing site will establish an ongoing collaborative relationship. The Manufacturing Site Assessment has been updated with additional emphasis onsite QOS, customer satisfaction, warranty performance, launch performance, sub-supplier process control and lean manufacturing metrics. The site assessment impact on a supplier's Q1 score has been revised and is now supported by a two-step process at the discretion of the STA engineer. The process will be triggered by: • Site assessment is late to the required 6 or 12 month frequency • Corrective action plan is not submitted to the STA engineer within 30 days after the site

assessment • Corrective action plan is ineffective in its execution

The first STA action will result loss of 150 points, and the second STA action will result in loss of 250 points and Q1 status. April 24, 2003

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Manufacturing Site Assessment (cont.) Fundamentals: Suppliers will perform a full site assessment based on the site quality segment status – segment I and II every six-months, segment III and IV every twelve-months. Suppliers are encouraged to conduct a focus element partial assessment, as appropriate, in order to drive continuous improvement and customer satisfaction. Focus elements are indicated by asterisks (*). T

he site assessment addresses the following areas of manufacturing process capability:

Planning for Manufacturing Process Capability - Quality procedures, QS-9000, TS 16949, QOS - FMEAs, Control Plans * - Employee Readiness, Training Review - APQP, Launch, PPAP, Run-at-Rate Review * - Manage the Change

Demonstration of Manufacturing Process Capability - Sub-supplier Quality Management * - Control of Incoming Quality - Control Plans, Operator Instructions * - Process Variability Monitoring, Reduction * - Gage Calibration and Use * - Part Identification, Nonconforming Parts, Packaging, Shipping - Testing, Engineering Specifications - Preventive Maintenance (PM), Housekeeping * - Manufacturing Flow, 6-Sigma and Lean Manufacturing Metrics * - Problem Solving, Corrective Actions *

Suppliers must evaluate each area and based on objective evidence determine if all Q1 manufacturing site requirements are satisfied. If a supplier fails to complete and submit their Manufacturing Site Assessment to the STA engineer at the required 6 or 12 month frequency, it may lose 250 points and Q1 status. Instructions for submission of the site assessment can be found on FSP at https://web.bli.ford.com. A more detailed explanation of the site requirements, including the Q1 Site Assessment Summary, follows this section. Any area of the manufacturing site assessment not meeting Q1 requirements will necessitate a site corrective action plan. The supplier will develop and begin implementation of the corrective action plan within 30 days of the site assessment. Failure to execute an effective and timely corrective action plan may result in a loss of 250 points and Q1 status. Ford STA will participate and review the site assessment, including corrective action plan follow-up, on a case-by-case basis.

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Manufacturing Site Assessment (cont.) Continuous Improvement: A supplier must demonstrate that it meets the site assessment requirements to maintain Q1 status. To achieve continuous improvement and maintain competitive advantage, suppliers should develop and implement specific action plans for current business and new programs, as follows:

Launch Performance: Suppliers are expected to have a process in-place to manage new vehicle program launches with the objective to achieve flawless launch execution. Key requirements for supplier launch performance include:

• Tracks performance to meet PSW dates and maintains a process to manage sub-suppliers • Supports vehicle prototype and pre-production build events in a timely manner • Conducts operator-based Quality Stand Downs on all new product or process launches

and incorporates Quality Stand Down information into the PFMEAS and Control Plans • Conducts Fresh Eye Reviews on all new products, gages, processes, and equipment, and

documents the findings with action plans implemented for all areas needing improvement • Conducts milestone reviews to communicate launch status, open issues, and issue closure

status to supplier senior management. • Captures and incorporates lessons learned into future program launch plans

Suppliers must meet program launch requirements, including responsiveness and closure of any identified launch readiness issues, in an agreed-upon timely manner. If a supplier fails to meet launch requirements based upon manufacturing quality requirements, it may lose 250 points and Q1 status.

Lean Manufacturing: suppliers will drive FTT and OEE improvement through specific actions documented in their Quality Operating System (QOS).

Variability Reduction: suppliers will drive Ppk and Cpk improvements on all Significant Characteristics (SC), Critical Characteristics (CC) and High Impact to Customer (HICs) through specific actions documented in their QOS.

Customer Satisfaction: suppliers will drive improvement in Things Gone Wrong (TGW) and repairs per 1000 (R/1000) by utilizing Global Quality Reporting System (GQRS) data and developing specific action plans that are documented in their QOS.

Continuous improvement of the manufacturing processes serves as the framework for achieving ongoing manufacturing efficiencies, variability reductions and customer satisfaction. Specific improvement thresholds will be provided on FSP at https://web.bli.ford.com. The following is a detailed explanation of the Q1 manufacturing site requirements. Refer to Q

Manufacturing

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