03 November 2005 | Rebecca Ellinor
General Motors plans to save $1 billion (£562 million) in the next financial year through reductions to its purchasing budget.
The move is part of the car manufacturer's $6 billion cost-cutting scheme, a component of its "turnaround actions".
Rick Wagoner, GM chairman and chief executive, told staff that market and economic conditions, together with poor results in the first three quarters meant the firm was at a "critical juncture".
The company plans to accelerate the turnaround, including job cuts and changes to its healthcare scheme. He said reducing spend on materials, GM's largest cost item, "remains a critical part" of the plans.
GM is aiming for a $2 billion gross reduction in its material costs bill for 2006, resulting in a net reduction of $1 billion after product improvement costs.
One idea is low-cost country sourcing (see News, 22 September). A GM spokesperson told SM
: "Areas such as China are emerging as logical places for us to source from."
But he said GM was considering the total cost of making and shipping a part, which means low-cost countries are a good choice for some parts but not all.