President Bush’s decision to revoke tariffs on steel should benefit the United States automotive industry by $US200 or $300 a vehicle, by one estimate, Dow Jones Newswires reported.
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The report noted that vehicle makers and their suppliers have been hard-hit by the tariffs, imposed nearly two years ago, because, as the vehicle manufacturers sought further and further price cuts from suppliers, the dramatic increase in steel prices put more pressure on already-tight bottom lines.
“It’s put a tremendous strain on trying to remain competitive in this deflationary environment,” Delphi Corporation president and CEO JT Battenberg told Dow Jones. As steel prices shot up, automotive suppliers were forced to shop around for the best steel suppliers, he reportedly said, adding: “It’s been very disrupting.”
The report said that Battenberg, who has personally discussed this topic with president Bush several times, said he is looking forward to thanking him for his decision.
Centre for Automotive Research economist Sean McAlinden told Dow Jones that while his group estimates the tariff repeal will save $200 to $300 per car, the true savings could be higher. His estimates include only steel that ends up in the cars and doesn’t include the cost of steel used to make the stamping machinery and moulds, the report noted.
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By GlobalDataAccording to Dow Jones, McAlinden expects the savings eventually will be passed on to car buyers but, for now, he expects the companies will use the extra cash to help reduce their reliance on incentives.
The report said another outcome of the tariff repeal may be that relations between the steel and automotive industry. McAlinden reportedly recalled a conference sponsored by his firm just over two years ago where things got heated as steel industry experts tried to make their case for tariffs in front of a crowd of automotive industry executives.
“The suppliers were furious,” Mcalinden told Dow Jones, adding: “It almost came to real physical activity. We had to separate some of them.”
McAlinden reportedly said better relations between the industries could be fruitful for both sides as there have been some solid partnerships in the past that helped forge new steel technologies that benefited the car industry and helped the steel industry keep ahead of plastic manufacturers.
On the other side of the Atlantic, Thursday’s news that the US tariffs were being dropped in the face of planned retaliatory European Union tariffs, carefully calculated to hit President Bush in marginal states as he heads into the 2004 election, was welcomed.
After hearing the news, EU trade minister Pascal Lamy reportedly said the decision showed what the EU could do when it acted together and “confirmed its weight”.
Referring to the proposed EU counter-sanctions, he reportedly said: “We did not just refer the matter to the World Trade Organisation, we also took some measures of our own on a precautionary basis.”
According to the BBC’s website, Lamy said he would now be asking the European Commission on Friday to drop the EU’s proposed protection measures.
But Ian Rodgers, director of UK Steel, a trade body for British steel manufacturers, told BBC News Online: “We give this news a cautiously optimistic welcome. We are delighted he has removed the tariffs but we are a bit wary about the announcement that there is to be a licensing system in place to deal with any further surge. We are worried that when the small print starts coming out in the next few days there will be a nasty surprise or two.”
