Q&A: Steel prices impact entire production chain

Frankfurt. Bernd Gottschalk, president of the VDA, the German auto industry association, spoke with Automobilwoche about high energy and steel prices and their impact on German vehicle and component manufacturers.

How serious is the impact on the automotive industry due to the high steel prices?

Huge. Prices for steel products have risen excessively during the past 12 months -- by up to 60 percent for flat steel. Mid-sized suppliers feel this increased pressure most of all, but it has an impact on the whole chain.

It seems that several suppliers are already in financial trouble due to the price pressure.

It is our responsibility to try and ward off such problems and also to fight the potential danger that there might not be enough supply for daily production. Suppliers, specifically mid-sized ones, are in danger of going bankrupt due to the current price development. One cannot sit back and say that the supply chain is strong enough. We all know that there is no ideal solution for this. Not even things such as passing on extra costs will solve the problem. Suppliers' cost problems are becoming increasingly urgent.

What strategies are you suggesting to your members?

Responsibility and transparency are crucial. Suppliers should show their customers -- suppliers who are higher up in the supply chain or car manufacturers -- how they are affected and what the consequences are for their particular products. The steel industry, on the other hand, needs to know that loyalty to a contract is irrefutable -- specifically during such difficult times as these. What happens today will be decisive for customers' loyalty tomorrow.

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