Steel prices force suppliers into bankruptcy

Munich. Price increases of up to 60 percent for steel and steel pre-products mean that an increasing number of medium-sized suppliers are on the verge of ruin.

"There already have been a few insolvencies," said Andreas Moehlenkamp, managing director at the association for the German steel and metal processing industry. But he would not disclose the names of the companies concerned.

The forge industry is most affected. There have already been some production stops after many of those businesses refused to pay the drastic extra costs demanded by steel producers.

Original-equipment manufacturers' refusal to pay the additional costs for raw materials caused a stir within the VDA, the German auto industry association.

In an open letter, consultant and former entrepreneur Manfred Raderschad accused Porsche boss Wendelin Wiedeking of getting rich at the expense of suppliers and of forcing businesses into bankruptcy.

VDA President Bernd Gottschalk said in an interview with Automobilwoche that not only medium-sized businesses, but the whole supply chain is under pressure due to the high steel prices.

He said: "The pressure to become more efficient is increasing, specifically in regard to labor costs."

Arcelor Group, the world's largest steel manufacturer, last week announced that with new supply contracts it would charge at least 20 percent more than before.

Salzgitter AG is also preparing its price increases.

Salzgitter CEO Wolfgang Leese told Automobilwoche that more than 50 percent of existing contracts with the automotive industry have terms of three years and therefore increases in raw material prices cannot immediately be passed on to the customers.

However, many medium-sized suppliers who do not have long-term supply contracts already have to pay more.

"Many businesses are under a lot of pressure," said Andreas Moehlenkamp, managing director of the Germany industrial association for steel and metalworking. He said that only the annual statements of accounts would show these businesses' real financial situation.

Forge operators are annoyed that steel manufacturers changed the basis of calculation for the so-called scrap-steel surcharges on September 1 at short notice and without prior consultation.

Tutmann said this amounted to a significant additional price increase for steel. He said many businesses do not have the financial reserves to cope with those additional costs.

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