The New York Times The New York Times Business February 7, 2003  

Job Market
Real Estate
- Media & Advertising
- World Business
- Your Money
- Markets
- Company Research
- Mutual Funds
- Stock Portfolio
- Columns
New York Region
NYT Front Page
Readers' Opinions

NYC Guide
Dining & Wine
Home & Garden
Fashion & Style
Week in Review
Learning Network
Book a Trip
Theater Tickets
NYT Store
NYT Mobile
E-Cards & More
About NYTDigital
Jobs at NYTDigital
Online Media Kit
Our Advertisers
Your Profile
E-Mail Preferences
News Tracker
Premium Account
Site Help
Privacy Policy
Home Delivery
Customer Service
Electronic Edition
Media Kit
Community Affairs
Text Version

Get 25 commission-free trades from Ameritrade.

Go to Advanced Search/ArchiveGo to Advanced Search/ArchiveSymbol Lookup
Search Options divide
go to Member Center Log Out
  Welcome, aoster

Steel Supplier Is Threatening to Drop G.M.


DETROIT, 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 battle.

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 higher costs."

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 short-term basis."

AK Steel, which was named the lead bidder for the bankrupt National 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 operations."

Doing research? Search the archive for more than 500,000 articles:

E-Mail This Article
Printer-Friendly Format
Most E-Mailed Articles

Start the day informed with home delivery of The New York Times newspaper.
Click Here for 50% off.

Home | Back to Business | Search | Corrections | Help | Back to Top

Copyright 2003 The New York Times Company | Privacy Policy
E-Mail This Article
Printer-Friendly Format
Most E-Mailed Articles


Recent Articles

G.M.'s Profits Almost Tripled Last Year (January 17, 2003)

G.M. Critical of Regulator Who Faulted S.U.V. Safety (January 16, 2003)

G.M. Warns of $2 Billion in Added Expenses From Pensions (January 10, 2003)

G.M. Raises Market Share and Increases Sales by 36% (January 4, 2003)


General Motors Corporation
AK Steel
Morgan Stanley Dean Witter & Company
Create Your Own | Manage Alerts
Take a Tour
Sign Up for Newsletters

Photo: Speed racer burns up the track, 1930's

Price: $195. Learn More.

Spotlight on...

Westchester Homes
Scarsdale, Ardsley, more...

Active Adult Homes
Retirement communities...

Search Other Areas