Commodity costs test suppliers’ mettle

This is a better article than most I see in the public press on the subject.

A few of the words in the article need explanation. This article is written for a local audeince in Indiana. People who live in Indiana are called Hoosiers.

The Indianapolis Star Indiana manufacturers are getting pinched as the cost of the basic ingredients of their products — steel, aluminum, nickel, copper and other commodities — have soared.

Auto supplier BorgWarner spent an extra $12 million in the first half of the year because of higher commodity prices, with aluminum contributing the biggest increases. Spot prices for aluminum, which BorgWarner uses to cast transmission parts, have shot up 32 percent in the last year.

So far, Hoosier consumers haven’t taken a big hit from these higher commodity prices yet. That’s because manufacturers have been able to offset some of the three-year price run-up with cuts elsewhere.

But such cuts often translate to fewer jobs and sometimes lower wages for Hoosier laborers.

Higher commodity prices are hitting the auto industry particularly hard. Because sales competition is so fierce between automakers, they will brook no price increases from their suppliers. So as commodity costs rise, the 90,000 Hoosiers employed at auto companies are under increasing pressure.

Among employees, BorgWarner has cut out overtime for some, asked for wage concessions from others, left vacant spots open and even laid off some workers. In Muncie, BorgWarner announced 76 layoffs last week. It employs more than 800 there making transfer cases.