After a crisis of confidence, GM of Europe has begun a painful turnaround. The company suffered big losses last year, but expects to make money in 2000. The Opel Astra is chasing the Volkswagen Golf for the European sales lead, and the Zafira small minivan enjoyed a successful launch. GM's suppliers get some of the credit for these successful product launches, according to Bo Andersson, GM of Europe's vice president of worldwide purchasing. Andersson discussed the company's purchasing policies with Edmund Chew, a correspondent for Automotive News Europe. Edited excerpts follow.
What have been your major issues?
We are launching many new products. The Astra was launched in 1998. The Zafira, Vectra and Omega are being launched in 1999. The new Corsa, a new mini, the Speedster, a coupe and a convertible come next year. These are the main events.
For me, the major focus is making sure that the new product launches come to market on time and with the right quality. On a new product, 70 to 75 percent of the parts come from outside suppliers. I want to create a balance in purchasing among quality, launch and cost requirements.
What level of cost reductions are you looking for from suppliers?
Based on our experience, 3 percent is an appropriate number for an annual reduction of cost that we expect all our suppliers to achieve. Some suppliers have faster technology changes and are able to achieve bigger improvements.
Apart from quality, launches and cost, what other targets do you have in purchasing?
The key focus when we purchase is new technology. It is becoming indispensable that suppliers offer advanced technology and that we work together to bring it quickly to market.
Do you require more systems integration from suppliers?
Our major suppliers are normally very good on the engineering side - the design. We see management of their suppliers as one of their biggest challenges. This is one of the big differences between the very good and the more average suppliers. We see big differences in how companies run their program management.
Are you outsourcing more components on future vehicles?
There is a constant change to modules and systems on future vehicles. On every new car we have introduced four or five new module systems.
It depends on the design of the vehicle and the expertise we want to use from suppliers. Some components are too critical for us to source from outside.
You have some logistic centers that sequence some parts from suppliers. What percentage of the parts volume do they handle?
About 15 to 20 percent of the value.
Is there room for that to increase?
I think that we have been successful with these logistic centers. The first-tier suppliers manage their chain.
You will add a supplier park at Opel's assembly plant in Russelsheim, Germany, for the next generation of cars. How many suppliers do you expect there?
We are looking for about 25 to 30 modules that will be assembled close to our factory and sequenced into the plant.
Will you establish supplier parks at the Bochum, Germany, assembly plant and other facilities as well?
We had a successful startup last year at Bochum for the new Astra. We already have a lot of sequencing in Ellesmere Port, England, where we have a small business park. If Russelsheim goes well, our intention is to continue with the small-scale business parks at our other major facilities.
What kinds of modules are you considering?
We are looking at the instrument panel, door modules, and axles. We already use seat and outside exhaust modules.
Are you going to change the total number of suppliers?
That is not an objective, but with new car platforms we will have more modules and more systems. For instance, we used to have 12 suppliers of fuel tanks. Today we have one system integrator that is responsible for the complete fuel tank, including the fuel pump, assembly and validation.
This is the right way to take away complexity and increase speed.
Is there a shift in the regionality of your sourcing? Are you sourcing much more from East Europe?
Indirectly, our supplier base has sourced much more from Eastern Europe. We have a lot of local sourcing for our new car in Poland, but from Western European suppliers who established plants there.