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Volkswagen moves into overdrive to slash costs
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Volkswagen Group (China) Corp announced yesterday it would launch a restructuring program to strengthen its control on its auto parts suppliers in China.


The move is expected to help the German car maker, which is on track to turn around its sales on the world's second largest auto market, to keep both tight control on product quality and to cut costs during its enlarged sourcing operations from China. Volkswagen planned to team up with a third party to offer training, supervision on its domestic auto parts suppliers in the program dubbed as "Qualification Supplier China Program," Wolfsburg-based Volkswagen said yesterday.


It will prompt domestic suppliers to work out future planning and to target inefficiencies in production, technology, management and workflow.


"The program will also help to enroll Chinese suppliers to our global sourcing system," the car maker said.


As the earliest overseas car makers to enter the Chinese market in 1985, Volkswagen has developed more than 300 auto parts suppliers in China.


Car makers are taking more and more Chinese suppliers into their global auto parts sourcing system for price advantages brought by lower labor costs.


However, they are also concerned about the quality of Chinese-made auto parts as the industry is still in its infancy with low technology know-how.


Volkswagen's sourcing from China totalled at US$1 billion last year, serving both its Chinese venture with Shanghai Automotive Industry Corp and First Automotive Works Group.


The company earlier forecasted its volume is expected to rise in following years.


The restructure program came one week after the car maker raised its sales target by 26 percent to 900,000 in China this year, after a similar cost-cutting program.


(Shanghai Daily October 23, 2007)


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