GM and Fiat set up Fiat-GM Powertrain and GM-Fiat Worldwide Purchasing as separate entities to pursue cost savings. Operations began Jan. 1.
Nunzio Pulvirenti, chairman of Fiat-GM Powertrain, said the joint ventures were expected to save $928 million by 2007. But the groups have nearly doubled the money-saving projects they identified after being formed in the wake of the March 13, 2000, GM-Fiat alliance, Pulvirenti said.
Early savings are coming primarily from the purchasing venture, said Dan Hancock, CEO of the powertrain group.
The purchasing venture was able to move quickly to negotiate lower prices with suppliers that the companies share and will push for shared parts, lowering unit costs.
Hancock said powertrain savings will come from reducing the number of shared engines and transmissions, which will require initial spending but will pay off as the systems come on line.
"We will have to make engineering and plant investments in the early part," Hancock said. "In the latter part of the investment period, we will begin to reap the benefits."
Bo Andersson, GM's executive in charge of worldwide purchasing, said GM and its alliance partners have made the most progress on "commodity type of buys like tires, glass, catalytic converters, wheels, steel."
Hancock said the powertrain partnership will build two transmission plants to produce a six-speed manual transmission. Plants most likely will be in Germany, Sweden or Italy, homes of GM alliance partners Adam Opel AG, Saab and Fiat, he said.
$460 million this year
Robert Socia, chairman of the purchasing venture, said the two units will save about $460 million this year. Savings will be split evenly between GM and Fiat.
Cost is not the sole criterion on awarding parts contracts, he said. The venture has rejected low bids when it felt that the supplier could not deliver quality at that price, Socia said, adding that all its cost-saving plans must be approved by Fiat and GM engineers.
Said Socia: "We as the buyers don't have the sole power to source. We need the technical people to say, 'Yes, that is a quality proposal.' "