DETROIT -- Rising oil prices might hurt General Motors' sales of trucks and SUVs, but they're a costly burden on the company's supply chain as well.
GM purchasing chief Bo Andersson said Wednesday that each $1 a barrel in oil prices translates into $4 million in costs for the company's North American operations. GM's supply base also is grappling with higher aluminum, steel and resins prices.
"All of these costs are escalating within our supply base," Andersson told reporters following a speech at the Federal Reserve Bank's Detroit Branch. Andersson, GM's vice president of global purchasing and supply chain since, oversees the automaker's $85 billion annual global parts budget.
Oil prices on Wednesday closed at $72.17 a barrel for light sweet crude on the New York Mercantile Exchange, up 82 cents from Tuesday's close and up about $12 a barrel over the last two months.
High oil prices, coupled with the resulting increase in gasoline prices, have bedeviled the market for light trucks and SUVs -- particularly in North America. SUV sales in the United States dropped 12.5 percent in 2005.
But the fuel prices create problems throughout automakers' supply chain, particularly for logistics operations to truck parts to the assembly line and then to ship vehicles to dealers.
Two of North America's largest car haulers, Allied Holdings Inc. and PTS Inc., are mired in Chapter 11 bankruptcy proceedings. They account for a combined 60 percent market share of the business. Both companies have been battered by rising fuel prices and high labor costs.
During his prepared remarks, Andersson discussed GM's supplier relations at length, conceding there have been problems.
"We have had suppliers angry at us for 12 years," he said.
But he also described how GM has improved relations with suppliers such as Denso Corp., which is 22.9 percent-owned by competitor Toyota Motor Corp.
"Business growth drives supplier satisfaction," he said. "If you don't grow, things get tough."
Denso has won a variety of new business with GM, including the heating and air conditioning work on Cadillac platforms along with the navigation systems on the GMT900 truck platform. Denso also is in the running for contracts supplying diesel technology, Andersson said.
"The relationship between GM and Denso is strong because there's common ground results - we both want improvement," said GM spokesman Tom Wickham.
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