Wolfgang Bernhard wants to cut VW's material costs by $1.21 billion.
VW-brand Chairman Wolfgang Bernhard and VW Director of Supply Francisco Javier Garcia Sanz told 150 suppliers at a meeting here that they expected to cut material costs by 10 percent.
That reduction should yield about $1.21 billion in savings between 2006 and 2008.
The cost-cutting program is part of the automaker's planned $4.84 billion in efficiency gains in the next phase of its ForMotion project.
The first phase will have saved $3.75 billion when it ends in December, VW said.
The automaker and its suppliers have agreed to pool materials purchasing, giving the group more bargaining power with providers.
Sanz said the move will give VW a major competitive advantage, but he declined to elaborate.
VW already has secured contracts through 2006 for 99 percent of its steel needs, Sanz said.
Bernhard and Sanz also outlined a new, gentler, approach to supplier relations.
VW wants to work earlier and more closely with suppliers on cost-reduction ideas, they said.
The program is designed to let VW and suppliers cooperate on finding ways to reduce costs of existing and future models.
Sanz also said the automaker wants to buy about $1.21 billion worth of components from China over the next three years.
VW just received its first shipment of steel from China.