In a move it called long overdue, BMW AG has merged global purchasing operations of its BMW and Rover units.
BMW said last week that the move will benefit some North American suppliers over some European firms.
BMW has ordered that sourcing must follow BMW procedures. It will move Rover's British sourcing activity into BMW offices in Munich, Germany, to create a central $17 billion buying center.
The operation has been organized according to the type of part being purchased. For example, one person will oversee electronics purchases for BMW and Rover.
BMW has named several managers to head specific technologies, including one from the Rover Group.
In telling suppliers about the merger, Wilhelm Becker, group vice president of purchasing for BMW, acknowledged sourcing for Rover out of Britain and for BMW out of Germany has caused confusion since BMW bought the British company in 1994. 'It sometimes has made it difficult for new suppliers trying to enter into partnerships with us,' he said.
MORE LEVERAGE FOR BMW
However, executives indicated the merger was prompted not so much by organizational problems as by BMW's desire for more leverage in making component deals.
'This should simplify things for our suppliers,' said Bruno Dehler, BMW's manager of supplier support and purchasing in North America. 'We can extend Rover Group's worldwide reach this way and enable them to operate on a scale they wouldn't be able to do otherwise.'
BMW wants to make Rover more profitable by increasing sales, having it share some parts with BMW vehicles and opening new markets. Rover spends about $6 billion a year on components, excluding tooling and equipment, according to BMW.
Rover also plans to set up kit factories in Brazil and Mexico. Such small-scale production becomes more profitable if Rover can share the cost of parts with other vehicles.
That should be good news for North American suppliers, Dehler said. 'Companies like Delphi and TRW are well suited to do business with us globally on this basis,' said Dehler, who purchases BMW components in North America for export to Germany. 'A TRW or a United Technologies can now talk to one person in our organization about doing business around the world.'
U.S. SUPPLIERS FOR ROVER
Because the United States is the world's leading sport-utility market, he said, 'it makes a lot of sense' to use more U.S. suppliers on Rover projects, since Rover specializes in that segment.
Rover installs some U.S.-made accessories on sport-utilities after they are imported into the United States. However, Rover does not buy U.S.-made production parts for European assembly plants.
'That will change,' Dehler said.
Last year, BMW bought about $300 million in U.S. parts for use in German plants. BMW also spent $60 million on U.S. accessories installed in BMW cars after they were imported to North America.