DETROIT -- After failing to meet cost-savings goals on its $85 billion global purchasing bill this year, General Motors plans to set cost targets on every part it orders.
GM had been expected to announce a purchasing-cost reduction goal to replace the three-year, 20 percent savings plan that ends this year.
Instead, GM plans to set a percentage savings target on each part purchased during its new two-year cost-savings program.
The automaker is not happy with the earlier program, which set an average of 20 percent savings over three years from its supply base.
Bo Andersson, GM's vice president of purchasing and supply chain management, told a gathering of his top suppliers at GM's Milford, Mich., proving grounds that they missed their cost-savings goal, according to a supplier CEO who participated via teleconference.
The CEO said that, of GM's top suppliers invited to the meeting, 80 had met their target; 186 have a plan to meet their goal but are short the expected savings; and 58 not only failed to meet their target but do not have a plan to do so.
GM confirmed the details.
The automaker warned that suppliers failing to meet cost targets could be penalized by being dropped from GM's steel resale program, an important source of steel at a stable price for parts makers.
Andersson and his purchasing staff have begun setting new cost-reduction targets with suppliers.
Andersson has also assigned senior top staffers, the so-called champions for suppliers, to help parts makers recover cost savings.
Executives who are familiar with the effort say the new cost-down strategy will force more suppliers to locate in Asia and other low-cost markets.
A GM spokesman says the automaker does not dictate where suppliers should locate, only that they supply lowest cost parts.
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