NEW YORK -- General Motors' copper usage per vehicle is expected to increase at a modest pace as new electrical, communications and other systems require more wiring in its vehicles, especially in hybrids.
Kathie Cepica, GM's global commodities manager of nonferrous metals, said in a NYMEX Metals Week presentation on Wednesday that GM sees its copper consumption growing as it develops mechanical functions and power needs in communications, navigation and info-tainment systems.
GM uses about 30 to 60 pounds of copper per vehicle, all contained in fabricated products, Cepica said.
Applications such as electronic power steering/steer-by-wire and a new brake-by-wire function could increase copper's usage by 3 to 4 pounds a vehicle, she said.
And as GM continues to develop and test hybrid cars and trucks, copper's per-vehicle weight could increase by 30 percent to 60 percent, she added.
Cepica said GM's hybrids should hit the market in five to 10 years.
The executive also said that GM, as a major nonferrous metals consumer, must hedge its upside price risk for the amount of copper it uses, because it is unable to raise auto prices to offset costs if raw material prices increase.
"Hedging is used as insurance for upside price risk. GM looks at the amount of copper going into a car and hedges for that exposure," Cepica said.
Interestingly, GM does not purchase a single pound of primary copper but instead buys parts to incorporate into its vehicles. It bases the price it pays upon the average weight of copper in the part, and it also pays a fabrication charge.
Most of the copper used by GM goes into electrical applications, with wiring alone accounting for 50 percent of the metal's use per vehicle, Cepica said.
GM's typical hedging horizon is three years out, although the company monitors its exposure on a quarterly basis, she said. "We must look as far forward as we can."
GM's June sales were running at a seasonally adjusted annual rate of 16.5 million vehicles, including heavy trucks, slightly above May's levels but flat with last year.
In 2002, GM sold more than 8.6 million cars and trucks, almost 15 percent of the global market.
GM claims a U.S. market share of around 27.3 percent.
Cepica said that GM expects world vehicle sales will fall about 1 percent in 2003 from 57.4 million units last year, although it expects to see the market grow about 3 percent next year and 4 percent in 2005.