VIENNA -- General Motors will use fewer Tier 1 suppliers in the future and continue trimming its $86 billion (E68 billion) global purchasing budget.
"Both our purchasing spending and our supplier base will shrink," Bo Andersson, GM vice president of global purchasing, said in an interview with Automotive News Europe. "Last year we produced 9.1 million vehicles worldwide. This year that figure will be even higher, but we will be saving money."
He cited three reasons:
1. Increased effort to source the majority of parts from fewer Tier 1s
2. Growth in emerging markets where locally sourced parts are cheaper
3. Continued emphasis within GM on lowering costs, for example, by using global architectures.
Andersson declined to say by how much GM's purchasing bill will be decreased, but did acknowledge it likely will be in line with GM's previous cuts. GM has said it would like to save $7 billion this year -- $1 billion from purchasing. GM lost $10.6 billion last year.
To help cut costs and improve quality, Andersson said, the majority of GM parts in the future will come from "about 500 Tier 1 suppliers."
In January, GM told Reuters it cut its supplier base to 3,200 companies from 3,700, or 14 percent, in the past 12 months.
"We are also seeing a reduction in the number of our supply base," said Andersson, who was in Vienna to address the Automotive News Europe Congress.
The move is similar to strategies of other automakers.
Last year, Ford said it was changing its global purchasing process to offer larger and long-term contracts to a smaller number of suppliers on future models.
Volkswagen also is intensifying cooperation with 19 core suppliers to build long-term relationships.
Emerging market focus
A native of Sweden, Andersson said GM will continue to increase its purchasing focus in emerging markets, such as eastern European markets Ukraine, Poland and Bulgaria.
"For me, as a European, it is threatening how ambitious suppliers from emerging markets are," Andersson said. "They have the ambition to become the best."
Andersson said GM has gained substantial cost savings from its global architecture program. For example, GM recently signed contracts with two separate seat belt suppliers that will allow the company to use those parts for two different vehicle architectures.
Global architectures and global sourcing on the next generation of mid-sized cars -- such as the Opel Vectra and Saab 9-3, for example -- will save about 20 percent, Andersson said.
GM also will seek that level of savings, and possibly more, on its next gener-ation of small cars, including the Opel/Vauxhall Astra due in 2009.
"Right now our first priority is to support our growth in markets like China but also in Poland, Ukraine, Mexico, Brazil and South Africa," he said. "Our second priority is to ensure the quality of our products and smooth launches of new models. Our third priority is reducing cost."
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