Carmaker General Motors is placing new pressure on its suppliers in an attempt to trim its $85 billion annual materials spending. GM cut their supply base from 3,700 to 3,200 in the last 12 months according to Tom Wickham, a GM spokesman in the United States.
“The supply base has to take a close look at their business and whether they're being efficient,” Wickham said. “Material cost is a significant part of the vehicle cost.”
The planned turnaround of GM will also include a cut of 25,000 jobs and the closure of 12 North American facilities through 2008. GM suffers from high labor costs as compared to its Asian counterparts.
This pressure on suppliers could benefit East Asian firms, where labor costs are lower. A “footprint in low-cost countries” could enable GM suppliers to become more efficient and profitable, according to Wickham.