BMW demands price cuts of up to 5 percent, say suppliers

Munich. BMW AG has started a cost squeeze on its suppliers.

The group is demanding its suppliers start an integrated quality and cost offensive. The aim is to achieve a "positive economic long-term result."

The group did not disclose any details about how much needs to be saved in costs, deadlines or how many suppliers are affected.

The company said that improving work processes and reducing costs is part of BMW's normal day-to-day business.

BMW purchasing director Gerhard Schuff said that BMW could not escape the pressure imposed by the general market situation.

"We have to examine how much potential for cost reductions each supplier has on a individual basis," he said.

Schuff stressed that financial savings should not be at the expense of quality.

Suppliers say BMW wants to reduce costs by simplifying technical solutions. BMW also has demanded general price reductions of up to 5 percent within 12 months from some suppliers. This demand has not been confirmed in writing.

BMW's tactics are not new. One long-term supplier said this kind of offensive had been used before. In 1993 the manufacturer's purchasing department wrote to suppliers about a product and process offensive that aimed to identify and analyze potential for improving efficiency and working processes.

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