>Honda claims that the steel isn't >available
from US steelmakers,
>though, so US steelmakers don't stand to
>benefit. Maybe their
>claim is true, but it's also a classic >way to
lock out
>non-Japanese producers from their supply >chain.
Honda is almost as much a designer, assembler and marketer as Toyota is, especially with things like the steel that goes into the body of a car. They'll go to whatever supplier can provide the materials and parts that allow them to pull of their designs and fit (a big if with US suppliers apparently) at the price they need to make money on the cars they sell. Japanese automakers have shifted out of aluminum and into special kinds of steel, something GM has only just started to do. Hint: this is one way they make safer but more fuel efficient cars and the US automakers have yet to catch up.
The Big Three, now significantly globalized, want the following for their US market: lenient gas mileage targets and pollution control requirements and a HIGHER YEN. They would seem to be getting everything they want. Moreover, more vertically integrated into the NA manufacturing base (and for all I know significant holders of steel-related shares), they won't be as hurt by higher steel prices--afterall, the prices are going higher but not at the same time the dollar goes up against the yen--since the dollar is headed down and the US will do nothing to prop up the dollar vs. the yen.
>Do you really think Japan is a low cost >steel
producer, anyway?
Well, no I never said it was. In terms of energy efficiency and labor productivity it beats most US steel (except the minimills). Technology wise, ditto. It has focused on more value added products for big customers (such as special steel for auto).
If the yen were at 140-150 to the dollar, the US manufacturing dinosaurs would be screamng bloody murder--that's steel, auto. As it is now, they think if the yen is 120 to the dollar, it's unfair. But now you know why I am able to buy two dress shirts at Uniqlo for a total that converts to $18.00--two shirts of similar quality (quite good for mass produced) would cost at least twice that much at Land's End (not counting S&H). It's the strong yen buying goods from a cheap labor market with a very cheap currency--that is, China.
>It does seem to require more political >capital
to jam
>bad trade deals down on unionized >industries
which
>also have many retirees who vote as well.
Like I said, the auto industry has its own wants, lax mileage and pollution standards, a strong yen/cheap dollar. Retirees and people in old union jobs retiring soon are a different matter. This is going to be one of the big, big issues in the US I think. Now that equity markets are down and staying down, retirement funds set up along the lines of insurance annuities are not going to be able to cover their spreads. If the stock markets in the US truly tank--as they did in Japan, I mean like a flat tire--then there will be real hell to pay, or make that won't pay.
------------------ Here is some key background, urls and excerpts only:
http://detnews.com/2002/autosinsider/0203/10/b01-436634.htm
Big 3 quiet on steel tariffs Automakers direct attention to future labor, CAFE battles.
By Susan Carney / The Detroit News
Comment on this story Send this story to a friend Get Home Delivery
DETROIT -- When President Bush last week hiked tariffs on imported steel, Detroit's Big Three automakers were uncharacteristically quiet about the action.
Despite their previous open opposition to the tariffs -- which could limit competition and lead to high prices -- General Motors Corp., Ford Motor Co. and DaimlerChrysler AG demurely declined comment.
Their silence, however, speaks volumes. Analysts said the muted response signals a new round of political prudence on the part of Detroit automakers as they grapple with a host of economic, political and regulatory issues.
Industry experts said the automakers may be reluctant to oppose a labor-friendly move as they prepare for difficult contract negotiations in the United States and Canada over the next two years.
They also are looking for help from the Bush administration to limit stricter fuel-economy requirements for cars and trucks now under debate in the U.S. Senate.
And they've asked the White House repeatedly to press Japan for reforms that would strengthen the yen, which is making imported Japanese cars and trucks more affordable in the United States and hurting Detroit's profits.
"How can you criticize another industry for receiving government assistance if you yourself want it?" said Sean McAlinden, an economist with the Center for Automotive Research in Ann Arbor. http://money.cnn.com/2002/01/07/ceos/gm_wagoner/
GM is the world's largest steel customer, and buys almost all of its steel for North American production from North American steelmakers. Many of the leading steelmakers, including U.S. Steel Group, Bethlehem Steel and National Steel, are discussing a broad multi-company consolidation to deal with mounting losses and competition from overseas steelmakers as well as nonunion U.S. steelmakers.
Wagoner said that GM is concerned about any move that could lead to higher steel prices, although its steel needs are covered by long-term contracts that limit any hikes due to industry consolidation. And he said GM did not have any particular problem with a broad consolidation of the segment.
http://sg.biz.yahoo.com/020531/15/2qgn8.html
Sumitomo Metal To Boost Steel Supply To GM Group - Nikkei TOKYO (Nikkei)--Sumitomo Metal Industries Ltd. (J.SMM or 5738) and the General Motors Corp. (GM) group have reached a basic agreement under which the Japanese company will supply high-tension steel sheet to Saab AB (S.SAA) and Holden Ltd. of the GM group, The Nihon Keizai Shimbun reported in its Saturday morning edition, citing sources at Sumitomo. Sumitomo Metal Industries already provides the GM group each year with 50,000 tons to 60,000 tons of the steel, which contributes to lighter car bodies.
Last year, the Japanese company developed a new high-tension steel with a tensile strength of 50 kilograms, compared with 35 kilograms for conventional products. It will supply this high-performance steel to the two automakers. Western automakers don't use high-tension steel sheet as much as their Japanese counterparts. It was Sumitomo Metal Industries' efforts to improve the steel's quality and make it easier to process that won it a new contract with the GM group firms. Use of the steel could reduce a car's weight by 15% and production costs by 10%, the sources said.
http://www.jetro.org/newyork/focusnewsletter/focus3.html
Focus: Steel
JETRO, 1221 Avenue of the Americas, NYC, NY 10020 January 20, 1999 Japan Seeks Resolution of Steel Issue Through Market Forces
Dramatic economic growth in the U.S. precipitated an unprecedented rise in domestic steel consumption during the first half of 1998. To maintain price stability and ensure adequate inventory in the face of an anticipated shortfall in domestic production, U.S. steel mills and large steel consumers dramatically increased their purchases of imported steel products above historical levels. Although the 1998 boom proved short-lived, this initial "blip" in demand resulted in a surge in foreign steel imports which U.S. steel watchers -- led by the domestic industry lobby -- now seek to counter through calls for retaliatory and other punitive measures, including quotas and anti-dumping charges. The Japan External Trade Organization (JETRO) provides the following information in order to examine this issue in greater detail: U.S. Steel Consumption Grows to Unprecedented Levels
As the engine of world economic growth, steel consumption in the United States grew to unprecedented levels in 1998 ? rising to the highest levels in recorded history. The addition of more than 12 million tons of U. S. domestic steel capacity between 1995 and 1998 was exceeded by an even sharper rise in U.S. consumption. In short, U.S. steel producers lacked the capacity to meet the needs of domestic steel consumers.
In fact, by mid-year 1998, in direct response to anticipated demand, U.S. mills began to import large volumes of hot-rolled sheets, semi-finished slabs and other imported products from traditional suppliers in Japan as well as manufacturers in a number of Asian, Latin American and central European countries.
U.S. auto makers and other large steel consumers also dramatically increased their purchases of imported steel products in the latter part of 1997 and early 1998. Foreign steel producers, facing declining demand in Asia and Latin America, were able -- and indeed eager -- to fill this demand, particularly in the hot-rolled sheet market which had been de-emphasized by U.S. mills in favor of production strategies that focused on higher value-added and more profitable products.
Unanticipated power outages, equipment failures and scheduled and unscheduled blast furnace relines accentuated this trend, further reducing the ability of U.S. mills to operate at full capacity. Prices continued to rise into April of 1998, reflecting the consensus view of a robust steel market.
See also http://www.aiada.org/pubs/fup/2001/fu102301.htm
for more background
------------------
Posted by CJ
__________________________________________________ Do You Yahoo!? Sign up for SBC Yahoo! Dial - First Month Free http://sbc.yahoo.com