GM heads for wire on steel contracts - General Motors
When Ghosn was installed at the helm of Nissan in 1999, the Japanese car manufacturer was on its knees, reporting a dollars5.6 billion (GBP3.05bn) loss in 2000. By 2001, Nissan was generating a dollars2.7bn (GBP1.47bn) profit and Ghosn had earned himself superhero status on the pages of Japan’s Manga comic books.
– The extent to which GM might have to provide ongoing operating and financial support to Delphi — for example, in the form of long-term supply contracts; and
For this reason, GM already has started working on ways to compensate for the growing cost of steel after 1995 by persuading more stampers to participate in its resale program and lowering its internal manufacturing costs. The company also now has fewer hands involved in the purchasing process by virtue of its centralization program (AMM, Aug. 1), and this is expected to make its buying activities more efficient and economical.
GM, which has a large portfolio of trucks and SUVs, has been further hit by a consumer desire for more fuelefficient vehicles. GM’s own figures on Friday reported that sales in Europe rose by just two-tenths of a percent in the first half of 2006.
The automakers are not the only customers requiring robust volumes. Manufacturers of home appliances and both commercial and household heating, ventilating and air conditioning equipment also have made known their need for more steel.
Importantly, management continues to pursue a balanced financial policy. The company had taken advantage of robust cash generation in recent years to reduce its formerly huge unfunded pension liability to a manageable level and to accumulate a large cash position — while taking actions to directly reward shareholders, such as repurchasing shares. Although its surplus liquidity has been significantly eroded by the strikes, Standard & Poor’s assumes that GM will be able to rebuild its cash reserves within the next year.
Steel industry executives said Harold R. Kutner, GM’s recently appointed director of worldwide purchasing, was no less tough in that position, from a policymaking standpoint, than his predecessors, G. Richard Wagoner and J. Ignacio Lopez. The toughness, or firmness, extends down the ladder, they said, to Volker J. Barth, director, worldwide purchasing, metallics, and Ronald R. Schuster, director, ferrous materials purchasing.
For a while, it appeared that GM was trying to strong-arm the domestic steelmakers into meeting its requirements at lower prices than its rivals were willing to pay. GM agreed to buy 50,000 tons of steel from Kawasaki Steel Corp. in Japan and did its best to spread the word around, as though to warn others that it would purchase considerably more steel overseas if prices on steel made in North America were not to its liking.