VW Backs N. American Supply Base

Seeking ways to offset the negative impacts of the strong euro and weak U.S. dollar, Volkswagen AG says it will move to increase purchasing from North American suppliers within the next two years.

Boosting the dollar-based component content of vehicles will help the auto maker create a “natural hedge” to combat the currency problems on its balance sheet, VW CFO Hans Dieter Potsch tells Ward's.

“We need to build our North American supply base, and that could take a 2-year execution,” Potsch says. The German auto maker also plans to ask its existing global suppliers to shift production of key components to North American facilities, where applicable. This should provide an additional cushion to the currency effects.

Potsch says VW currently has a small research and development presence in the U.S., but plans are progressing to boost those ranks in short order to identify additional supply opportunities within North America.

In addition, VW says it will work with suppliers to stave off soaring prices for raw materials, most notably steel.

The German auto maker says the steep increases in raw-material prices are forcing some suppliers to teeter on the brink of bankruptcy, and it wants to help by bundling purchases among its Tier 2 and Tier 3 parts makers.