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Volvo may cut suppliers to reduce costs, purchasing boss says

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Volvo may cut suppliers to reduce costs, purchasing boss says

Volvo is considering reducing its parts suppliers to about 300 from 450 now.

October 29, 2010 12:00 CET

Volvo Car Corp., the Swedish carmaker owned by China's Zhejiang Geely Holding Group Co., may cut its supplier base by as much as 33 percent to reduce costs and simplify manufacturing, purchasing chief Bernt Ejbyfeldt said.

“We have a lot of small suppliers, and we want the right ones that will focus on us as a company,” Ejbyfeldt said Thursday in a phone interview from the company's Gothenburg headquarters.

Volvo is considering reducing the number of suppliers to about 300 from 450 currently, Ejbyfeldt said. The 20 biggest, which account for about 70 percent of the parts, will gain as smaller ones around Europe are phased out, he said.

CEO Stefan Jacoby needs to reduce spending to make Volvo profitable as he seeks to double sales to 800,000 cars annually over the next 10 years. The last time Volvo showed a profit was in 2005, when it posted pretax earnings of $377 million.

Good Q3 results

Without providing details, the automaker said Friday that it made an operating profit in the third quarter on a 12.5 percent rise in unit sales to 272,555 through September.

"It is the third consecutive quarter that Volvo achieves a positive result, which is very encouraging for the whole company," Jacoby said in a statement Friday.

The company said Friday that it will provide detailed results when it releases its 2010 full-year earnings report, which is due in early 2011.

Volvo is reviewing its supplier base and has not yet started cutting any companies, Ejbyfeldt said, adding the effort is likely to take three to four years to complete.

Volvo's top suppliers include seat belt and airbag maker Autoliv Inc., seat manufacturer Johnson Controls Inc., and Robert Bosch Gmbh, which provides a range of products including electronic components. Some suppliers have had difficulties keeping up with rising volumes this year, Ejbyfeldt said.

“We have a problem with some suppliers that can't handle the increased capacity, not giving us enough supplies,” he said, adding that the shortfall in supplies mainly concerns microprocessors.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101029/ANE/101029832/1193#ixzz13lKHxNC7

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