MG Rover plans to eliminate supply chain costs by 20 percent, the Financial Times (FT) reported.
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The newspaper said the English car maker, which recently announced an alliance with China’s Brilliance Holdings, is launching a cost-cutting initiative, code-named Drive.
MG Rover spends well over £UK1 billion ($US1.4 billion) a year with UK suppliers, the FT said.
The newspaper added that MG Rover, sold two years ago by previous owner BMW, has transferred 200 engineers to the three-year Drive programme with instructions to maximise savings from the supply base.
The FT said the engineers’ main task would be to work with suppliers to review the design and engineering of all components systems supplied. The review will cover both parts for current models and those in development for future MG and Rover models, the newspaper added.
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By GlobalDataThe FT said that the initiative is certain to put pressure on suppliers to cut costs and would likely tighten the screws further relatively soon because future MG and Rover models will be developed and manufactured jointly with China Brilliance.
The FT added that, although MG Rover chief executive Kevin Howe had insisted that the Chinese alliance gives UK suppliers a chance to win much higher-volume business, China’s rapidly developing expertise as a low-cost producer of automotive systems is likely to tempt MG Rover to source more parts there.
Howe told the FT that “we are not going to up sticks and source every component in China”. Nevertheless, he acknowledged to the newspaper that “there will be a joint sourcing structure” and that UK suppliers “have got to be competitive”.
The FT said that MG Rover purchasing chief Mark Smith, told a component suppliers’ seminar that the company needs to be leaner and more flexible. Smith added that the group had cut its losses last year to less than £200 million, compared with £254 million in 2000.
The respected independent industry analyst at Cardiff University, Garel Rhys, predicts that the group should lose no more than £30 million in the current financial year, the FT said.
