PARIS -- Suppliers who squeezed money out of PSA/Peugeot-Citroen last year to compensate for high raw material costs should expect to give some back in 2009.
Prices are nowhere near where they were back in April, so we want to recover as quickly as possible what we lost last year, PSA Vice President of Purchasing Jean-Christophe Quemard told Automotive News Europe.
The French carmaker will renegotiate supplier contracts that were changed dramatically in early 2008 when aluminum, copper, oil, palladium, steel and other raw materials reached record prices.
Our top priority in 2009 will be to take advantage of the turnaround in raw material costs, Quemard said.
PSA has about 800 main suppliers. The automaker says its raw material costs have risen by more than 1.5 billion since 2004. Quemard does not see the group winning all of that back, but he insisted that this years renegotiations would help the carmaker level out the bump from last years price spike.
PSA also is encouraging its component suppliers to renegotiate contracts with raw material suppliers.
It is in suppliers interest to go out and look for raw material reductions in their own contracts, Quemard said.
Quemard, who took over PSAs 30 billion purchasing division in January 2008, said that raw material prices have been one of the major stumbling blocks in his quest to reach a medium-term goal of curbing costs by 6 percent annually.
The cost-cutting objective stems directly from PSA CEO Christian Streiffs Cap 2010 restructuring plan.
The plan, launched in 2007, aimed to increase sales to 4 million units in 2010 from 3.3 million units in 2006, with an operating margin in the 5.5 percent to 6 percent range. Last October, PSA said it expected its 2008 operating margin to be 1.3 percent.
Raw material prices and a sales slump across the industry have slowed progress toward these goals, Quemard said.
Due to unforeseen factors beyond our control, were not on a trajectory to meet the initial objectives. But the transformation is continuing, across the product line and across the supply chain, Quemard said.
PSA has already cut costs by more than 2 billion over the last 18 months.