DONGFENG CITROEN is introducing competition among its suppliers to reduce manufacturing costs.
'Until 1997, raising local content was our top priority,' said Guy Janois, Dongfeng Citroen's co-purchasing manager. 'Now we are looking to slash costs.'
The joint venture had to respect rules laid down by Chinese authorities. Local content had a direct effect on customs duties applied to the import of parts. Local content has now grown to a level of 82 percent.
Dongfeng Citroen has 130 suppliers. Half of them are joint ventures or are operating under license from Western companies. With the exception of steel sheets, brought in from steel makers Sollac (France) and Cockerill (Belgium) for their better quality, the main suppliers are located in China. For example, Plant 3303, a division of Dongfeng Motor, makes seats built under license from Bertrand Faure. The electrical wiring harnesses are made by a Dongfeng Citroen-UT Automotive joint venture.
'We have just started a double-sourcing policy to get better prices and to secure deliveries,' said Janois. 'We will jump from 130 to 200 suppliers, but we want to keep our first suppliers.'
Dongfeng Citroen purchases will reach 3.5 billion yuan this year. Suppliers have been asked to slash prices by 14 percent in 1998 and by the same amount next year.
'Up until now, we've only found a second source for components with a short lead time,' said Janois. 'The suppliers have rather low local content, so it's hard for them to slash their prices.'
But things are on the move. Michelin could become a competitor to Dongfeng Motor, the present tire supplier. Dongfeng Citroen is also talking with Asian steel makers such as Posco (Korea), Baogang (China) and Kawasaki Steel (Japan) to replace its European suppliers.