HANOVER, Germany -- Volkswagen AG plans to cut 10 percent from its materials costs by 2008 and will sharply step up buying from suppliers in China, said Franciso Javier Garcia Sanz, the head of purchasing at Europe's biggest carmaker.
Lopping a tenth from materials costs would save around 1 billion euros ($1.22 billion), Sanz told reporters Thursday at a supplier awards event, adding it had already discussed this with suppliers.
"In the next three years we want to have purchasing volume of $1 billion from China," Sanz added, specifying that this represented annual purchasing volumes, up from around $250 million a year now.
VW officials had already signaled that they were eager to get steel from China, and Sanz said the company had already received and was processing its first Chinese steel shipment.
But he dismissed speculation that VW was playing the China card to improve its leverage in negotiations with steelmakers such as Arcelor and ThyssenKrupp.
Chief Executive Bernd Pischetsrieder said in a newspaper interview this week that Volkswagen planned another multi-billion-euro efficiency program in 2006 to 2008 to help offset sagging car markets and rampant price wars.
"By 2008, more than 4 billion euros in measures aimed at improving earnings could be necessary again," Pischetsrieder had told the Frankfurter Allgemeine Zeitung, adding that this did not include just cost-cutting measures.
VW is already planning to achieve cost savings of 3.1 billion euros this year to help it reach its forecast of higher operating and pretax profit before and after special effects.
Sanz said talks with VW suppliers had also focused on quality, promising he would be tough but fair in dealing with partners. But he said suppliers had agreed almost unanimously that VW's savings targets could be attained.