Fiat Group Purchasing

Fiat Group
Purchasing
Gianni Coda
April 21, 2010
Fiat Investor Day
0
Fiat Group Annual Purchase Value (APV)
2010E
€42bn
(distribution constant through plan period)
18%
Indirect
materials, Services,
Machinery &
Equipment
Direct
materials
€28bn
19%
€30bn
~ 50%
~ 25%
25%
82%
81%
~ 15%
75%
…
~ 10%
…
Distribution of direct materials supplier
80%
Over 70% of direct
materials spending
involves suppliers
shared by 2 or more
Sectors
APV
60%
40%
20%
60
April 21, 2010
200
# of suppliers
Fiat Investor Day
1
Procurement principles
Raw materials
• Contractual agreements usually on 1-year rolling basis
• 50-80% of requirements covered (including sourcing for
suppliers)
Supply base
• In 2007-2008 reduction in weight of critical suppliers below 5%
of APV (15% before ‘06)
• Economic crisis resulted in critical suppliers rising to almost 10%
of APV in 2009
• Enhanced monitoring of potential risks and reinforcement of
supplier pool
Sustainability program
• Fiat Group as vector of responsible behavior along entire supply chain
• Strong ethical principles in all areas of business
• Mutually beneficial collaboration with premier partners sharing our principles
April 21, 2010
Fiat Investor Day
2
Looking back over 2007-09
Lingotto Plan targets
(Nov 2006)
2007
2008
2009
Gross savings
700
850
890
€2.4bn
Raw materials
400
270
240
€0.9bn
Net savings
300
580
650
€1.5bn
What we have accomplished
(€bn)
(0.9)
(0.4)
2.4
1.5
Gross savings
Raw materials
Net savings
1.1
Volume impact
Actual net savings
2007-09 as per Lingotto Plan
April 21, 2010
Fiat Investor Day
3
Direct materials – Guidelines & actions
Enhance supplier partnerships
Increase share from Best Cost Countries (BCC)
Continue focus on design-to-cost
Leverage Fiat Group/Chrysler Group synergies
April 21, 2010
Fiat Investor Day
4
Direct materials
Enhance supplier partnerships
 Focus on global and strategic suppliers
 Long-term contracts
 Streamlining of supplier base
 Roll-out of World Class Manufacturing
methodology to supplier pool
 Reinforcing supplier network through
Fiat Group Purchasing System
Expected gross savings of ~ €1.4bn over plan period
April 21, 2010
Fiat Investor Day
5
Direct materials – Enhance supplier partnerships
Focusing on global and strategic suppliers
Supply base rationalization and optimization
Fiat Group glass commodity – 2010E APV ~ €250mn
<15
~5
Number of suppliers
2006
Current status
2014E
with growing
concentration in BCC
April 21, 2010
Fiat Investor Day
6
Direct materials – Enhance supplier partnerships
Supply base streamline
Supply base rationalization and optimization
CNH Experience:
 Reduction in number of minor suppliers
Number of suppliers
 Set up grow/fix/exit strategy by commodity
for new projects
25%
DONE
…
Additional
25%
within end
2012
…
Latin America
April 21, 2010
North America
Europe
Fiat Investor Day
7
Direct materials – Enhance supplier partnerships
Fiat Group Purchasing System
FGP Information System, shared by Sectors worldwide,
manages supplier relationships, sourcing process and
master data
Supplier Portal
As the single point of
access and information
exchange between
suppliers and FGP
Integration &
coordination
between FGP & Sectors
Sourcing Process
Management
Across Sectors and
worldwide purchasing
regions
Purchasing Performance
Management
Master Data
Management
April 21, 2010
Supplier rating
(Financial & Quality)
Fiat Investor Day
8
Direct materials
Best Cost Countries
 Generate savings by increasing BCC-sourced APV, through
• Steady growth of BCC sourcing
• BCC supplier involvement for new product development
• Enhance range of BCC sourceable products, reducing untapped share
 BCC sourcing offices established
• Shanghai since 2007
• India since 2008
 Fully leverage Fiat Group/Chrysler Group integrated BCC
sourcing offices
• Agreement already signed with Chrysler to cover Far East area (China &
Korea offices)
• Integration of other offices ongoing (India, Europe)
Expected gross savings of ~ €0.3bn over plan period
April 21, 2010
Fiat Investor Day
9
Direct materials – Increase share from BCC
APV Footprint
BCC
import
Increase of BCC imports
by 4% or ~ €1bn to 14%
in 2014
10%
Unimportable
30%
10%
38%
BCC
local
22%
Untapped
2009 APV from BCC
Local & import combined up to 48% or €11bn
April 21, 2010
Fiat Investor Day
10
Direct materials
Continue focus on design-to-cost
 Fully dedicated cross-functional teams
 Platform and component standardization
 Benchmark and teardown analysis
 Supplier reward program
Expected gross savings of ~ €0.8bn over plan period
April 21, 2010
Fiat Investor Day
11
Direct materials – Design-to-cost
Examples
Savings per unit
April 21, 2010
Universal joystick
base module
€ 54
New architecture for
airbag ECU
€7
Simplified tow hook
cross member
€ 51
Crankshaft weight
reduction for small
diesel engine
€3
Fiat Investor Day
12
Direct materials
Saving opportunities
Fiat Group/Chrysler Group synergies
Organizational alignment
Common strategies on major commodities and major suppliers
Price benchmarking
Architecture sharing
Suppliers
2010E combined APV ~ €40bn
60%
Unique
65+%
40%
52%
ON APV
Shared
ON APV
…
Expected savings of ~ €0.8bn over plan period
April 21, 2010
Fiat Investor Day
13
Direct materials
Fiat Group/Chrysler Group synergies
Price benchmarking: comparing components and system costs
Ongoing cost comparison has already yielded savings
opportunities
Fiat Group buys better
Chrysler buys better
Electric/electronic systems
Infotainment
Interior trim
Wheels & tires
Transmission systems
Safety & security
Glass
Paint systems
Seat systems
Suspension
Steering systems
Instrument panel systems
Exhaust systems
April 21, 2010
Fiat Investor Day
14
Direct materials
Fiat Group/Chrysler Group synergies – Saving examples
Incremental savings from negotiation
Savings standalone basis=100
156
100
100
Halfshafts
ESP control units
166
150
100
100
Paints
April 21, 2010
113
Springs
Fiat Investor Day
15
Direct materials
2010-14 targets
APV trend
€22bn
€30bn
€34bn
€36bn
2.3%
2.3%
€26bn
Gross saving
2.2%
2.2%
2.2%
2010E
2011E
2012E
2013E
2014E
Gross savings
520
570
660
780
810
€3.3bn
Raw materials
(220)
(170)
(160)
(200)
(200)
€(0.9)bn
300
400
500
580
610
€2.4bn
Net savings
April 21, 2010
Fiat Investor Day
16
Indirect Materials – Guidelines & actions
 Cross-sector savings activities & best practice
implementation to achieve global saving
solutions
Capital
equipment &
indirect
materials
46%
 Fiat Group/Chrysler Group synergies through
joint sourcing approach and global information
sharing
54%
Services
 BCC supplier development
• worldwide approach supported by local
presence
• development of local suppliers, with focus on
China, India & Serbia
2010E APV
~ €7.4bn
Expected savings of ~ €0.5bn over plan period
April 21, 2010
Fiat Investor Day
17
Indirect materials
Fiat Group/Chrysler synergies – Examples
 ICT
• New global computer purchasing agreement (desktop,
laptop & options)
• Merger of agreements with major software contractors
 Machinery & equipment
• Bundling Capex sourcing for new initiatives (e.g. current
activity on 5 new bodyshops, 3 Fiat Group & 2 Chrysler
Group)
• Indirect materials: standardization (e.g. powertrain cutting
tools: common suppliers and unified tools)
April 21, 2010
Fiat Investor Day
18
Conclusions
Establishment of joint Fiat Group/Chrysler Group Purchasing
essential in reaching Group’s objectives
Expected savings over plan period
€2.9bn
• €2.4bn (of which €0.8bn from joint Chrysler activities)
from direct materials
• €0.5bn (of which €0.3bn from joint Chrysler activities)
from indirect materials, services, machinery &
equipment
April 21, 2010
Fiat Investor Day
19