The head of purchasing at General Motors is aiming to save “close” to his $1bn cost-cutting target this year – even though the world’s largest carmaker has already warned it will be impossible to reach.
Bo Andersson said the company continued to chase the net $1bn target even though soaring raw material costs had made the job of reducing its $86bn purchasing budget harder.
The goal is part of an overall $7bn annualised cost saving target the company has set for the end of this year, with the rest coming from factory closures, job cuts and a healthcare deal with workers.
The cuts are part of a plan to return to profit at its US automotive business, which drove group losses of $10.6bn last year.
“I have not given up on it and I will not give up on it until Christmas,” Mr Andersson told the Financial Times at an Automotive News conference in Vienna.
Mr Andersson said the company was heading for a “good” second quarter as its recovery plan was “progressing well”.
It made a profit in the first quarter after a surprise accounting ruling by the stock market regulator allowed it to spread out the $3bn costs of the healthcare deal over six years.
GM missed its last three-year purchasing savings goal, which ended in December, by almost half – in large part because Delphi, its biggest supplier, failed to improve in the US, Mr Andersson said.
The company had set a “stretch” target of saving a gross 20 per cent, but only saved 11 per cent. Its new three-year goal is based on targets for particular component types, rather than an overall number, he said.
GM is stepping up audits of its component suppliers in an effort to find cost savings and quality improvements in the operations of its partners.
These audits have uncovered corner-cutting by some suppliers in an effort to offset the rising cost of raw materials – such as using lower-grade aluminium than agreed – and were being resisted by many.
“When we audit we always find something,” Mr Andersson said.
He called on suppliers to give GM the same level of openness they offer Toyota, frequently rated as the best car manufacturer to sell parts to. GM is typically rated among the worst, although supplier executives have said that it is improving.
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