Blog: 'Commodity surcharge'
Dave Leggett | 14 May 2008
Plenty of eyes will be on the latest initiative by ArvinMeritor to pass on soaring commodity prices to its customers. Will it stick, or more accurately, how much will ArvinMeritor's customers believe it is reasonable to pass on? My guess is that some soundings were taken before the announcement was made, to ensure that it wouldn't be laughed out of court.
One thing's for sure: market conditions are not conducive to the OEM passing 'extraordinary' costs on to the final consumer. The question, working back, then becomes where on the supply chain are rising prices to be absorbed. A number of Tier 1s in North America are just about walking out of intensive care - there were some encouraging Q1 financial results, mainly buoyed by non-North American operations (Na ops still financially precarious) - and it's probably not in their customers' interests to send them back in.
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