Toledo-area firms pressured by costs of materials
12.08.2008 11:00
Shopping
- Source: toledoblade.com
Within every Cooper tire and every Dana axle, every granule of Andersons fertilizer, and every Libbey tabletop glass are the raw materials that make those products possible. Cost of commodities have rocketed in recent months, pressuring manufacturers to boost prices and fueling inflation across the economy. Costs of steel, plastics, chemicals, agricultural products, and other raw materials peaked last month before falling slightly, but they are very high by historical standards, and consumers haven't experienced much of a decline in prices, according to the U.S. Department of Labor's consumer price index. The International Monetary Fund said the costs of raw materials has doubled since December, 2005, and has nearly quadrupled over the last 10 years. High prices for steel, for example, have affected the long relationship between Chrysler LLC and Toledo's Dana Holding Corp. Last week, Dana filed suit against the automaker asking the bankruptcy court that oversaw its reorganization to end its contract with Chrysler this year because it is losing $75 million a year. It signed the Chrysler contract when steel prices averaged $310 a ton, and they are $850 today. "We have to resolve upside-down contracts," Dana executive chairman John Devine told investors last week after filing suit to terminate the relationship with Chrysler. Several agricultural commodities also shot up this year, only to retreat slightly but remain ahead of historical margins. Corn, for example, which traditionally traded under $3 a bushel, shot up as high as $8 a bushel two months ago. It is at about $5 now. Corn-based products are used extensively in food and animal products, as well as in production of ethanol, which is mixed with gasoline to make fuel. A spokesman for The Andersons Inc. said the company has had to closely monitor its raw-materials costs for the items that it manufactures, such as ethanol and fertilizer. Although costs have risen dramatically, spokesman Deb Crowe said, the company has been able to pass most of those increases along to customers. "High prices have started to curtail some of the demand" for fertilizers, Ms. Crowe said. "We've been trading in grain for 60 years, and we've been working in fertilizer since 1960s, so we've got some pretty good skills in terms of managing [ourselves] in those markets." Perhaps the most public commodity swing in recent months has come from oil, which affected consumers not only at the pump when prices shot up to $147 a barrel in June before falling back to about $115 yesterday, but elsewhere in the pocketbook. "It's definitely had an impact on our operating profits," said Curtis Schneekloth, a spokesman for Cooper Tire & Rubber Co., of Findlay. "No matter how aggressively we attack the costs on our operations, there's no way to pass on all the increased costs from raw materials." Cooper Tire is projecting a 25 to 30 percent increase in the costs it pays for the materials it uses in itss tires and other products, a projection that translates to an added $108 million. The increases are in oil, steel, and natural rubber, along with energy, Mr. Schneekloth said. The price of plastics, used extensively in both packaging and products like automotive interiors, has also climbed dramatically in recent months as oil and the cost of energy to produce different grades of plastics have risen. The situation with plastic also has affected plumbers, but not nearly as much as the price of copper. "We're not even using copper anymore because it's gone up so much," said Phil Schuster, who's been a plumber in west Toledo since 1968. "We used to buy copper at 30 cents a foot, and now it's $1.50 a foot." Contact Larry P. Vellequette at:
lvellequette@theblade.com
or 419-724-6091.
| 
Add comment