General Motors is still on track to shave off $US2bn in global purchasing costs this year, despite high raw material prices, purchasing chief Bo Andersson told Reuters.
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“We are still inside those brackets. We are working hard to offset the rise in raw materials prices,” he told the news agency.
As GM cuts costs in its current major restructuring by axing 30,000 workers and 12 plants, Andersson’s goal is to slash $2bn from the automaker’s $86bn purchasing bill every year, for an indefinite period, the report said.
“There are two strategies to this, the short-term and the long-term,” he said, speaking to Reuters on the sidelines of a series of industry seminars in Traverse City, Michigan.
“In the short term, the goal is to buy the best-quality parts at the best landed cost,” said Andersson, who the report said is a former Swedish Army officer who rose through the ranks of GM Europe and is known for his tough-minded approach to GM’s supply chain.
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By GlobalDataReuters noted that GM now buys about 32% of its parts from low-cost countries such as Mexico, Brazil, Russia, South Korea, China and Thailand, up from 20% in 2002.
For the North American market, however, GM still buys 95% of its parts from North America. Andersson reportedly said he expects that to fall gradually as purchasing from countries such as Taiwan, Thailand, South Korea and Russia grows in the coming years.
“People think we’ll buy more from China, but China’s own market is growing, and my priority in China is to make sure we have the parts we need for the products in that market before we ship them anywhere else,” he told the news agency.
GM now buys about $9.3bn a year in parts from Mexico – about 16% of its North American parts bill – making Mexico the second-largest source of GM’s parts, the report noted.
Andersson reportedly said he sees growth in that number as well. “Logistically, it’s cheaper because they are so close to us. Ten percent of my cost of parts from China is shipping.”
For the longer term, Andersson told Reuters, GM was working with suppliers and engineers to standardise parts across vehicles on a global basis, allowing more sharing of ‘commoditised’ parts such as seat frames.
GM makes 26 versions of the seat frame, while Toyota, expected to overtake GM as the world’s largest automaker in a year, makes only two.
“There is an opportunity there,” Andersson told the news agency.
