HANOVER, Germany – Volkswagen will cut costs by working more closely with its suppliers, pooling material purchases and buying more from China.
Volkswagen brand CEO Wolfgang Bernhard and VW Director of Supply Francisco Garcia Sanz told 150 suppliers at a meeting here Thursday that they expected to cut material costs by 10 percent – E1 billion – between 2006 and 2008.
The new cost-cutting program is part of Volkswagen’s planned E4 billion in efficiency gains in the next phase of its ForMotion project. The first phase will have saved E3.1 billion when it ends in December, VW said.
Volkswagen and its suppliers have agreed to pool materials purchasing, giving the group more bargaining power with material providers. Sanz said the move will give Volkswagen – Europe’s No. 1 auto producer – a major competitive advantage, but he declined to elaborate.
Volkswagen already has secured contracts through the end of 2006 for 99 percent of its own steel needs, Sanz said.
Bernhard and Sanz also outlined a new, gentler, approach to supplier relations. VW wants to shift from its current focus on competitive bidding to work earlier and more closely with suppliers on cost reduction ideas, they said.
The program is designed to let Volkswagen and suppliers cooperate on finding ways to reduce costs of both existing models and future model programs.
Sanz also said that Volkswagen wants to buy E1 billion worth of components from China over the next three years. VW just received its first shipment of steel from China.