As reported here, Daimler AG plans to increase its sourcing of automotive components from China nearly eight-fold within four years. The luxury car maker will buy $3.25b worth of car components per year in China. Now, BMW is itching to get in on the act. Not that BMW is new to buying parts in China, they have done that for years, mostly unbeknown to their well-heeled customers. BMW and Daimler are in talks to create a huge buying co-op. They want to create critical mass, and drop the bomb on their Chinese suppliers, the German Handelsblatt reports. By concentrating their buying power, Beemer and Benz intend to save €350m per year, in discounts alone. To assuage their American clientele, they say that they will also extend the stingy hand of their allied purchasing departments to parts suppliers in the U.S.A. However, with the dollar high and U.S. parts manufactures dead, or on the brink of extinction, the BMW/Mercedes buying axis is squarely targeted at China. The “deeper discounts” news from Deutschland already has Chinese parts makers atwitter and alarmed. Here is why ….
For long, Volkswagen and Audi have profited from their purchasing clout in China in a big way. They produce the same cars in China, they use the same parts for production back home. Made in Germany on the outside, Made in China on the inside. For a year, BMW and Daimler have been discussing an axis of acquisition already. Now Daimler CFO Bodo Uebber is getting edgy and signaled to Munich to “get on with” finishing the deal. Times are tough, and with a €350m saved here, and a €350m saved there, soon you’ll be talking real money. BMW wants to save €4b until 2012 in purchasing. Cable harnesses are already being outsourced to Africa. In the meantime, other makers in Europe are busy forging alliances: Peugeot, Toyota and Citroen together build cars in the Czech Republic. Fiat and Ford are in the heavy petting stage, aimed at giving birth to small cars. Parents BMW and Fiat want to arrange a tête-à-tête between Mini and Alfa. How far until we’ll see a huge parts purchasing co-op for the whole shebang?