Chrysler ups spend on low-cost sourcing

1 March 2007
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01 March 2007 | Paul Snell

Car manufacturer DaimlerChrysler is to spend an extra ¤3.8 billion (£2.5 billion) on sourcing from low-cost countries.

The move was announced as part of the company's recovery and transformation plan, designed to change its business model and return it to profit by 2008. A spokeswoman said that as it became more global (90 per cent of the firm is currently based in the US), it would do as much local buying as was feasible. This would include working with partners in the region and some outsourcing.

The company would not reveal its purchasing budget, but its total worldwide annual spend is ¤84 billion (£56.5 billion).

The firm also plans to reduce the cost of the materials it uses by 1.15 billion (£773 million) by 2009, but said it was too early to discuss how this would be achieved.

Tom LaSorda, president and CEO of Chrysler, said the firm would rely "more heavily on leveraging partnerships to manage costs", including working closely with suppliers to develop more cost-effective products.

The company will also cut 13,000 jobs as part of its recovery, but it could not state if the losses would affect procurement or supply chain operations.

Meanwhile, Carlos Ghosn, president and CEO of Renault, has praised the efforts of its purchasing to reduce costs, after sales at the company dropped by 4 per cent.

Ghosn said that despite the price of raw materials rising by ¤429 million (£228.5 million) in the past year, purchasing had reduced the group's costs by ¤309 million (£207 million), a saving of over 4 per cent, in 2006. Yet the company declined to give further detail about how these savings were achieved.


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