Management Accounting

GM Looks to Cut Parts Costs

The automaker embarks on an aggressive two-year plan to reduce expenditures.
Stephen TaubSeptember 23, 2005

Financially struggling General Motors Corp. has targeted suppliers in its latest bid to cut costs.

As part of a two-year program to pare its $85 billion purchasing bill, GM is seeking price reductions on a part-by-part basis, rather than setting a companywide cost-cutting goal, according to The Wall Street Journal. The strategy will probably lead to more outsourcing by the suppliers, the paper noted. “If a supplier chooses to go to a low-cost country, that’s their prerogative,” GM spokesman Tom Wickham told the paper.

The Journal stressed that the GM did not specify exactly how much money it hopes to save. However, part of its plan is to offer bigger contracts to suppliers under a new global vehicle-development system.

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Meanwhile, several of the automaker’s suppliers are suffering from their own financial difficulties. They include GM spin-off Delphi Corp., the world’s largest auto-parts supplier, which has been plagued during the past few months by bankruptcy rumors and union-related problems.

The Journal also reported that GM’s top purchasing official, Bo Andersson, presented the company’s new plan to about 300 “key global suppliers” at a conference in Milford, Michigan. This fall the company plans to meet with suppliers individually.