Monday, October 17, 2005

Volkswagen Group and its Suppliers Aim for Triple-Digit Million Savings

Text from Volkswagen AG.
First Suppliers’ Convention brought to successful close in Wolfsburg

Wolfsburg, 17 October 2005 - The Volkswagen Group and its key partners identified and approved triple-digit million savings potential at the first Suppliers’ Convention. The individual measures are to be implemented in ongoing projects immediately. At the same time, Volkswagen AG agreed long-term strategic partnerships with suppliers at the week-long event. The Suppliers’ Convention was attended by Francisco Javier Sanz, Group Board of Management member responsible for procurement, and Dr. Wolfgang Bernhard, Chairman of the Volkswagen brand Board of Management.

Volkswagen selected 38 suppliers to participate in the Convention. These suppliers, together with 38 cross-departmental teams of experts from the Volkswagen Group, formed tandems which identified and assessed the cost-cutting ideas put forward at the Convention. Volkswagen contributed its know-how in cost optimization methods to this process. The Board of Management and top managers subsequently decided on the proposals to be implemented.

The logistics of processes were analysed, optimized and decided. These new process definitions bring significant cost reductions. There is also to be even more consistent use of vehicle modules. Innovative materials and new design solutions in module architecture, for example, bring improvements in the key areas of quality and vehicle weight. At the same time, these decisions make a contribution to reducing costs, sometimes substantially.

Initiator Francisco Javier Garcia Sanz said after the event: “We are delighted it has been possible to identify and decide on such significant additional savings potential for ongoing projects. The successful suppliers will become our premium partners and will have special standing when we come to deliberate on new vehicle projects at future product conventions. This forms the basis for our further cooperation. The first strategic discussions already took place during the Suppliers’ Convention.”

Dr. Wolfgang Bernhard emphasized: “The only way we can continue to prove Volkswagen’s competitiveness in future is through innovative ideas and the commitment of every individual. This is precisely what the Suppliers’ Convention has confirmed. We have given special scope to our suppliers’ contributions and ideas. Success is also attributable to the frankness of our exchange. We are especially pleased with the constructive suggestions put forward by suppliers.”

The initiative met with a very positive response from suppliers, particularly as Volkswagen provided vital support in the form of sufficient know-how. A positive echo came from the ranks of suppliers, who unanimously praised Volkswagen’s support: “This Convention is really new and innovative – Volkswagen and the supplier provide the know-how and develop cost optimization proposals in a very short space of time. Volkswagen can reduce its own costs and at the same time the supplier is in a position to improve his competitiveness in the market. We will be using the Volkswagen methodology with our own suppliers,” commented one participant.

The Volkswagen Group already launched the novel Suppliers’ Convention to optimize product costs at the end of August. The initiative continues the “product costs” building block of the ForMotion program, and focuses on material costs. Continuation of the ForMotion program is expected to bring gross savings totalling seven billion Euro.

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