Posted on 07/07/2002 9:13:12 PM PDT by Black Powder
Honda Motor Co. airlifted as much as 200 tons of specialty steel to North America from Japan at the end of June to cover a shortage at its plants here and is poised to airlift 2,000 more tons this month if needed, the company confirmed last week.
The highly unusual and costly measure comes amid a developing shortage of high-quality steel products in the United States after President Bush's decision to curb imports with tariffs of up to 30 percent. By acting to push prices higher, the tariffs have caused spot shortages as steel supplies get diverted to the highest bidder.
"We're still working to procure the steel we need locally, but we're prepared to have steel flown in" if there are shortages when production resumes Monday, July 8, said Ron Lietzke, a spokesman for Honda of America Manufacturing Inc.
Honda's plants in Marysville and East Liberty, Ohio, build the Honda Accord and Civic, and the Acura CL and TL. The plants were shut last week for summer vacation.
Honda also builds the Odyssey minivan in Lincoln, Ala., and the Civic, Odyssey, Pilot, Acura MDX and Acura EL in Alliston, Ontario. It is not clear if those plants have been receiving normal steel supplies.
The decision to airlift steel appears to be under consideration by other Japanese automakers. In Tokyo, Kawasaki Steel Corp. disclosed last week that it had received "urgent requests" in late June from some Japanese automakers, but declined to elaborate.
According to a Japanese press report, Honda procured its steel for the airlift from Nippon Steel Corp., Sumitomo Metal Industries Ltd., Kawasaki and Kobe Steel Ltd.
Honda would not provide details on the unusual arrangement, such as the exact date of the shipment or the destinations. The company did not reveal the amount of steel flown in, but said it was between 100 tons and 200 tons.
The costly move is "a temporary measure," said a Honda official, who declined to be named.
Hefty price tag
It's also an expensive measure. Shipping 2,000 tons of coated sheet steel would require 20 747 flights at a cost of as much as $300,000 per flight, according to Roy Stapleton, a vice president with a GeoLogistics Americas office in Carlstadt, N.J.
Honda's airlifted steel also would be hit with the 30 percent tariff, pushing the cost even higher. In Japan, hot-rolled, zinc-coated 1.6-millimeter steel sheet is quoted at $433 to $442 per ton, but a spokesman for Nippon Steel said the price of auto-quality steel would be higher.
That 2,000 tons of sheet steel would be enough to build about 1,800 vehicles, according to David Anderson, a director with the American Iron and Steel Institute. Honda's Ohio plants build that many cars in a single day.
In Tokyo, Honda spokeswomanNoriko Okamoto said the airlifted steel was only for buffer stocks, and the shortages would not lead to any disruption in production schedules or changes in the production mix.
She did not say precisely what led to the air shipment. "Maybe we didn't anticipate some effects of the tariffs," she said.
Honda buys about 94 percent of its North American steel needs from North American suppliers. The remainder is imported specialty steel.
Four months after the tariffs were announced March 5, the levies are sending pain through the automotive industry. Makers of auto parts, especially stamped parts, were hit almost immediately with skyrocketing prices and spot shortages.
Tariffs causing pain
The tariffs were seen as a way to give U.S. producers an opportunity to raise prices. They had been at a 20-year low, in part because of a torrent of lower-priced steel into the United States. More than a quarter of U.S. steel makers have sought Chapter 11 bankruptcy protection.
But apparently unforeseen was the negative effect the higher prices would have on supply. Instead of creating additional capacity, brokers and suppliers tend to raise prices or divert shipments to the highest bidder, creating spot shortages.
Steel supplies already were tight because the U.S. industry lost more than 8 percent of its capacity last year with the liquidation of LTV Corp. A fire last December at a Double Eagle plant also has temporarily decreased the domestic supply of some grades of auto steel, according to steel industry executives.
The Big 3 say they have adequate supplies, but a steel industry middleman said the "automakers are butting heads with the steel mills" over prices.
At Toyota Motor Manufacturing North America Inc., which will face significant steel-contract renewals this fall and next spring, an official said its suppliers already are warning it to expect sharply higher steel prices.
Dennis Cuneo, senior vice president of Toyota Motor Manufacturing North America, said Toyota gets about 95 percent of its steel domestically and supply is not yet an issue.
"But several suppliers are trying to push the issue that when their contracts expire, we can expect a 20 to 30 percent price increase," Cuneo said.
$100 per car
"That's $100 million additional increase in North American costs, which comes out to $100 per car. We are definitely concerned about that."
Honda may be using the airlift as a negotiating ploy, in effect saying, "We can bypass your price demands by doing something like this," said Kenji Tanaka, an analyst at Daiwa SB Investments Ltd.
Other analysts agreed that Honda would not cut production even if it has to choose either accepting a price increase by local steel makers or absorbing the higher cost of airlifted steel.
"They will never stop the lines, even if they make less (money)," said Shigeharu Kimishima, an analyst at Kokusai Securities Co. For Honda, the U.S. market is a money generator even if its profit margins shrink.
Why? The cars are manufactured by U.S. workers using 95% U.S. produced materials. The stupid tariff that Bush put on the specialty steel was simply pandering for union votes. The U.S. steel companies are simply raising prices, but not keeping up with the necessary production. The few steel workers jobs protected by the tariff are more than offset by the domestic job losses caused by the increased price of materials.
All the current partnerships between Japan and Detroit result in cars that are manufactured with parts from both places. It is improbable that you could buy a car that is 100% American parts and labor today.
i get so sick of hearing this ridiculous tripe repeated ad nauseum by people who have no clue about what they're blathering about
foreign manufactured steel is only about 25% of the u.s. market, about 75% of u.s. needs are met by domestic producers
defense purchases of steel are less than 1% of domestic production
the entire chicken-little argument is nothing but garbage spouted by union goons trying to justify their continued extortion of the rest of us so that they may remain overpaid
joke's on them though, all of those bankruptcies were of unionized producers, and the largest u.s. steel producer, nucor, is thriving and is 100% non-union
It is a very real possibility that our next war will be against the wishes of the majority of the members of the U.N., and they will attempt to enforce embargos against us, and I don't expect the euro-weenies to try to help us out.
what it sounds like is the temporary spot shortage that it is, probably due to the idiotic tariffs which disrupted the market
further, not only doesn't it mean that we don't have plenty of capacity, which we do, it certainly doesn't have anything to do with having "no steel industry", your original point, which remains a favorite fantasy of protectionists and union apologists
well, he can rant all he wants, but he'd still be wrong, except with respect to niche markets
perhaps there are more examples of tiny markets out there such as the one he's in, but that doesn't change the fact that 75% of u.s. steel needs are met by domestic producers
Bush Jr. is not only Wimp Jr. - he's proving to be a moron as well. Just what our country needs right now, huh?
Federal rule requires use of expensive U.S. steel
Sacramento -- The price tag for the new eastern section of the Bay Bridge, currently estimated at $2.6 billion, could climb by hundreds of millions of dollars because of a federal rule requiring the use of steel made in the United States.
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