Geely to cut its auto parts suppliers by half

Geely Automobile Holdings Ltd, China's largest privately-owned carmaker, plans to cut its spare parts suppliers in China by over 50% in the near future. Meanwhile the company also set up a management team to take charge of the company's spare parts purchase procedures, spare parts inventory as well as logistic support.

"Geely has unveiled plans to centralize its purchase operations while it intends to buyout most stakes from its four affiliated plants in China," said Geely's vice president Wang Ziliang.

The management team will first work out a set of new polices regarding the purchase of spare parts and begins to utilize a computer-based information system in spare parts management, Wang said.

Secondly, Geely will streamline a sophisticated auto parts supplying structure by reducing the number of its auto parts suppliers. Geely will reduce its spare parts suppliers to 300 -500 by the end of 2007. The company now has 1000 auto parts suppliers.

"The primary goal behind this move is to improve our product quality," Wang explained. "Our second goal is to reduce costs."

Geely hopes to cast off its old image as a cheap, low-end auto producer. It hopes to follow practices of international auto giants while trying to compete with them globally, Wang said.

Earlier last month, Geely unveiled plans to buyout its four affiliated plants in China. The net asset value of affiliated plants stood at US$467 million as of the end of 2006. 

Geely sold 204,000 cars last year and plans to triple it output capacity next year to some 600,000 vehicles annually. The company hopes to be able to turn out a million cars annually by 2010.