Peugeot Citroën asks suppliers to dual source

27 October 2011

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27 October 2011 | Adam Leach

French car manufacturer PSA Peugeot Citroën will work with suppliers to mitigate the impact of natural disasters on its supply chain.

The car giant, which reported that supply chain issues and rising input costs contributed to a drop of 1.6 per cent in automotive revenues, will roll out a plan requiring vendors to have alternate sources of supply in different countries.

The strategy is in response to disruptions experienced after the Fukushima earthquake earlier this year. PSA Peugeot Citroën’s third quarter results, published yesterday, said: “The group confirms the negative impacts over the full year of €250 million (£219 million) from the aftermath of the disaster in Japan.”

Explaining the plan during a conference call, Philippe Varin, chairman of the managing board, said: “We have been hit by the Fukushima disaster so we have a plan in the company to double source.”

Under the plan “all the suppliers” that source from just one plant would be required to identify an additional source in a different country. The plan has been finalised but will be rolled out gradually. “We have a roll out planned for the next few years because it cannot be done overnight,” he said.

As a result of an interruption in the supply of screws in September, production across Europe was hit and 45,000 fewer vehicles were produced. And high raw material prices resulted in the company having to spend €700 million (£613 million) more than forecast.

In response to the drop in revenues Peugeot Citroënhas agreed on a plan to cut costs by €800 million (£700 million). A statement announcing the plan has been approved, explained that measures will include the loss of an estimated 2,500 jobs and a reduction in IT costs. The statement also said the company would look to “leverage the benefits of the relationships forged with its strategic suppliers”. Further details are not yet available.

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