BAD news for Nissan's hard-pressed component suppliers this month - the Japanese giant has no intention of letting up on its drive to cut costs.

Executive vice-president Hiroto Saikawa told international news agency Reuters that he wants to see Nissan further slash purchasing costs by 15 per cent by March 2008.

Nissan management have identified savage cost control as the best way to keep driving up profits - it's the same reason why the group has notched up record figures in the past few years.

Carlos Ghosn - dubbed Le Cost Killer during his time with Michelin - may now be joint chief executive of Renault as well as his former Japanese employer but his ethos - "squeeze and squeeze until the pips squeak" - is still clearly alive and well. But can the group manage to achieve such an ambitious target?

When Ghosn took over, Nissan had grown flabby and complacent. There was plenty of spare fat to cut away and headline-grabbing cost reductions were fairly easy to achieve.

Now the fat has gone and Nissan is in fine shape. It's hard to keep on pressing component suppliers to cut their costs - at some point the simple law of economics dictates it won't be possible. Suppliers will go elsewhere - or go under.

Mr Saikawa admitted as much when he told Reuters: "Basically, the idea is to maintain the same level of purchasing cost reductions as in our previous business plan.

"Whether we can do this depends on the balance between the speed of our cost-cutting projects and headwinds such as the rising materials prices, but this is certainly the target during the current 'Value Up' business plan."

Thanks partly to its increased buying clout - Nissan now does everything with Renault - the group have already cut costs by 15 per cent since 2002.

It would be wrong, however, to attribute Nissan's spectacular success solely to the determined efforts of the corporate bean counters.

The company has finally rediscovered its knack for making cars people want to drive.

Vehicles like the X-Trail 4x4 - which actually outsells the Primera, a so-called "volume" model, in many markets including the UK - have struck a chord with buyers eager to acquire a car that's practical, cheap to own and good to drive.

The brand image has also improved, thanks to the launch of aspirational models like the 250Z sports car and the Murano luxury off-roader.

No wonder operating profit grew by more than $1bn in the last financial year.

All this could be undermined if oil and materials prices continue to grow, however.

Lower purchasing costs are accounting for less and less profit growth.

They were down to 131 billion yen in 2004/05 from 183 billion the previous financial year and 227 billion the year before that.

To protect itself from higher materials costs, Nissan is looking east - to China.

Nissan dubs China and other South-East Asian countries as "LCCs" or leading competitive countries - where cheap labour helps to offset increased materials pricing.

Nissan hopes parts produced in the LCCs will be 30 per cent less expensive than Japan and, presumably, Europe.

The Japanese are also eyeing Renault's cheap factories in Eastern Europe and Brazil.

Bosses plan to swap components between each other, so Renault factories could be stamping panels for Nissans in Eastern Europe as the Chinese production lines churn out millions of Renault steering wheels.

Where this leaves component suppliers in Western Europe is anyone's guess, but continued cost pressure is inevitable.

As one North-East supplier put it: "We're in a global market now and nobody is under any illusions. If we want to stay in the game, we've got to keep on driving costs down.