ETROIT, Feb. 6 — The largest steel supplier to General
Motors is threatening to cut off shipments because of a
dispute over contract terms that has turned into a legal
For G.M., the world's largest automaker, the halt of steel
shipments from AK Steel, based in Middletown, Ohio, could lead
to layoffs at 15 factories and tens of millions of dollars in
losses a day.
"We've been trying to resolve this for some time and have
not been able to," said Alan H. McCoy, a spokesman for AK
Steel, which provides steel used in car and truck bodies.
The company would not comment on whether it had set a
deadline for halting shipments.
The dispute between G.M. and AK has led to counterfilings
in courts in Michigan and Ohio in recent months, but has not
been publicized, according to a report by American Metal
Markets, an industry trade publication. No court date has been
set in either state.
The dispute centers on long-term steel contracts that run
from the beginning of 2000 through the end of 2004. Under the
terms of the contracts, the price paid by G.M. declines over
time. But AK Steel contends in court filings that new
inspection, testing and quality control systems requested by
G.M. increased its costs and that it was not compensated, as
required by the contract.
"There's a clause in our contract that stipulates if we
incur higher costs to supply steel as a result of increased
testing and other changed requirements, that we recoup those
increased costs," Mr. McCoy of AK said. "General Motors has
another view of that."
Renee Rashid-Merem, a spokeswoman for G.M., said: "We're
expecting them to meet the quality requirements that are part
of the contract and we expect them to deliver the steel in
accordance with our contract. Whether they've had to incur new
processes or additional costs to meet the quality
requirements, that's their issue to manage."
The dispute is a sign that the balance of power between
steel companies and automakers is less one-sided than it used
to be. Since the steel industry went through a wave of
bankruptcies and the Bush administration imposed a 30 percent
tariff on imported steel, the remaining domestic steel
companies have had, if hardly boom times, more leverage.
Wayne Atwell, an analyst at Morgan
Stanley, said that in previous years "the auto industry
was the eight-foot gorilla and would force the steel industry
to go along with what was necessary."
"Frequently, you wouldn't get paid for extras or different
inspections or specs," he said. "You had to swallow those
Now supply is tight, he added, and it would be difficult
for G.M. to replace its supply from AK easily. "It would be
hard," Mr. Atwell said.
"AK is one of the top quality suppliers, and supply is
really limited now. Could you get that steel? You might be
able to get some of it. But you couldn't replace it all on a
AK Steel, which was named the lead bidder for the bankrupt
Steel Corporation today by a federal bankruptcy court
judge, was also involved in a dispute over prices with Honda
last year, though that did not go to court.
The dispute with General Motors appears to be more serious.
Because automakers use a system that is known as just in time,
which reduces costs by keeping excess supply to a minimum, a
cutoff from a major supplier could slow or stop production of
many of the General Motors brands, which include Chevrolet,
Pontiac, Buick, Saturn and Cadillac.
"Any part is critical, especially in such a large volume
operation," Ms. Rashid-Merem said.
"They provide directly or indirectly 15 plants in North
America. As any just-in-time company, any interruption of
supply would significantly interrupt our