LTV Steel Co. May Get Price Increase from General Motors Corp.

Strategic Insights -

General Motors Corp. and LTV Steel Co. may be inching closer to a deal on price hikes for steel, a development that could impact automaker's bottom line. A report in the November 30 issue of American Metal Market cited GM sources indicating the automaker would need to pay higher prices for steel, which would increase the cost of a vehicle by about $50 next year. However, the talks have not been confirmed, and both GM and LTV officials have declined to comment on the negotiations.

Key Takeaways:

  • The negotiations between GM and LTV Steel Co. may result in a price increase for steel, which would impact automaker's bottom line.
  • A report in the November 30 issue of American Metal Market cited GM sources indicating the automaker would need to pay higher prices for steel.
  • The price hikes would increase the cost of a vehicle by about $50 next year, according to the report.
  • GM has resisted price hikes in past negotiations, but industry experts doubt the automaker can hold the line again.
  • Steel industry experts believe current conditions in the industry favor steel producers, who are working at capacity levels.
  • LTV Steel Co. accounted for about 75% (not 13% as initially reported) of GM's steel sales last year, according to company financial reports.
  • The negotiations between GM and LTV Steel Co. are a significant factor in determining prices for the industry.
  • The outcome of the negotiations could have a ripple effect on the entire steel industry.
  • Industry experts predict that steel price hikes will continue in the coming years due to strong demand and capacity utilization.

Statistics:

  • 12% price increase for steel over the next two years (as reported in American Metal Market).
  • $50 increase in the cost of a vehicle next year due to higher steel prices (as reported in the American Metal Market).
  • 75% of LTV Steel Co. accounted for GM's steel sales last year (according to company financial reports).
  • 13% of LTV's steel sales accounted for GM (initially reported, but not accurate).

Sources:

  • American Metal Market, November 30, 1999 (cited in the article as a source of the report on GM paying 12% more for steel).
  • General Motors Corp. spokesman John Shea (declined to comment, and stated that reports should be taken "with a grain of salt").
  • LTV Steel Co. spokesman Mark Tomasch (declined to comment, citing company policy of not commenting on business dealings with customers).