Frankfort-Francisco Garcia Sanz took over as director of purchasingat Volkswagen Group in late 1996, following the resignation of his mentor, Ignacio Lopez. Volkswagen buys DM60 billion ($35 billion) of components annually. He was interviewed by Automotive News Europe reporter Beatrix Israel.
What standards must a VW supplier meet?
There are five main elements: flexibility, innovation, quality, service and competitiveness.
Which has the priority when there is than one strong competitor?
All are valued the same. In cases where several companies offer comparable performance our purchasing group ranks them by grading each one of these elements from one to 10. So far the results have always been clear after this kind of analysis.
A core group of 10 persons, in a roundtable discussion.
In a recent speech you said that VW was not always a comfortable customer. What did you mean?
VW is not an easy customer and sometimes uncomfortable. But to us, this is the basis for mutual success. This is how a constructive climate can develop. We want an open dialogue with our partner where both partners can speak their mind.
How have prices developed in recent years?
Looking at the Golf IV you can see that the car is equipped with many new features that before were optional equipment at an extra price. The new car is cheaper than its predecessor and includes more equipment. All in all it totals a reduction of about DM2,000. But this amount is not only influenced by purchasing costs. Lower car prices are also influenced by the common-platform strategy put into effect by Ferdinand Piech in 1993.
How much does purchasing influence car prices?
Purchasing costs represent about 60 percent of the price of a car and therefore rank first.
What percentage of VW parts come from outside suppliers?
Sixty to 65 percent for the Golf and the same for other models.
Where do your suppliers come from?
Eighty percent from Germany,
15 -18 percent from the rest of Europe and the rest from elsewhere.
How do you deal with shifts in currency exchange rates?
On principle we pay in the local currency of the supplier, so the currency risk remains with VW. Before we enter a contract we have specialists evaluate the market situation and forecast the currency's development over the next three to five years.
What other challenges do you face in the future?
One of the biggest is the introduction of a single currency. We have to see what the euro will bring. I don't know how the euro will make us all equal.
Currency differences will be avoided, but the purchasing power in Italy will still be different than in Germany and so will wages. I watch the situation with much interest.
Will VW have fewer suppliers in the future?
We will not reduce the numbers of our partners. At the moment we work with about 2,000 supplier companies worldwide. This number has remained stable in the past and will be stable in the time to come.
Will any more outside work be moved inhouse?
We are constantly looking out for areas in which we can be competitive. Suggestions are always evaluated.