VW to work earlier, more closely with suppliers

By Edmund Chew, Automotive News Europe

Hanover, Germany -- Volkswagen AG says it will cut costs by working more closely with suppliers, pooling material purchases and buying more from China.

VW-brand Chairman Wolfgang Bernhard and VW Director of Supply Francisco Javier Garcia Sanz told 150 suppliers at a meeting here that they expected to cut material costs by 10 percent.

That reduction should yield about $1210 million in savings between 2006 and 2008.

The cost-cutting program is part of the automaker's planned $4840 million in efficiency gains in the next phase of its ForMotion project.

The first phase will have saved $3750 million when it ends in December, VW said.

The automaker and its suppliers have agreed to pool materials purchasing, giving the group more bargaining power with providers.

Sanz said the move will give VW a major competitive advantage, but he declined to elaborate.

VW already has secured contracts through 2006 for 99 percent of its steel needs, Sanz said.

Bernhard and Sanz also outlined a new, gentler, approach to supplier relations.

VW wants to work earlier and more closely with suppliers on cost-reduction ideas, they said.

The program is designed to let VW and suppliers cooperate on finding ways to reduce costs of existing and future models.

Sanz also said the automaker wants to buy about $1210 million worth of components from China over the next three years.

VW just received its first shipment of steel from China.

From Automotive News Europe

Reuters (UK) story