Delphi Corp. said on Thursday that a court has issued a restraining order ensuring shipments to the motor industry supplier will continue as the company negotiates steel price hikes with its suppliers.
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According to Dow Jones Newswires, three major suppliers to Delphi recently wrote letters to the company requesting the price increases, saying a dramatic rise in steel costs is putting pressure on their finances – they threatened to break their contracts if Delphi wouldn’t comply.
The report said a stoppage in shipments could mean some General Motors assembly plants won’t get the parts they need while GM has said it expects its suppliers to stick to their original contracts.
Delphi spokeswoman Claudia Piccinnin told Dow Jones the company received a restraining order to maintain its shipments but would not comment further.
The news agency noted that steel prices have skyrocketed since December, when many suppliers received notice from their steel distributors informing them of the surcharges. Ana Lopes, director of government relations at the Motor and Equipment Manufacturers Association, told Dow Jones the surcharges started out at around $US20 to $60 a ton, depending on the product type.
Now, the surcharges have reached $80 to $130, she reportedly said, accounting for a 20% to 30% cost increase in three months.
“Especially for our small manufacturers, their ability to manoeuvre around an immediate cost increase is so slim, something like this could overwhelm them,” she told Dow Jones.
Original Equipment Suppliers Association president Neil De Koker told the news agency the issue is difficult for suppliers, who are locked in to paying the high surcharges steel companies have tacked on to their prices. The steel mills and distributors have threatened to take the supplies off their allocation lists if payment isn’t made, with no guarantee they’ll be allowed back on, he reportedly added.
Unless the suppliers’ customers are willing to help offset those surcharges, many of the auto suppliers won’t make it, he told Dow Jones, adding: “The systems can’t absorb these kinds of price increases.”
