Honda plans to move parts procurement to emerging markets from developed nations as well as consolidating purchases to use fewer supplier outlets to cut costs by 10%, the Nikkei reported without naming its sources.
Initial savings are estimated at JPY100bn (US$1.08bn) annually, according to the paper. Honda spends between three and four trillion yen on parts each year, according to Nikkei estimates.
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Honda’s transactions with parts suppliers in China, India, Southeast Asia, Brazil and other emerging countries are expected to increase.
The Nikkei noted that Honda makes cars at 25 factories in 16 countries and regions, and parts are received from some 2,200 facilities. Each component type, such as brakes or upholstery, comes from seven to eight plants. Under the proposed changes, Honda will narrow this down, procuring parts from three to four plants mostly in low-cost regions, the report said.
The automaker will start selecting new suppliers in 2011 and aims to complete the shift from suppliers in developed nations by 2013, the Nikkei said.
The move will help the company prepare for stiff pricing competition in the emerging markets, where demand for low priced vehicles is rising, the business daily said.
