GM won’t buy steel from Stelco until spring due to logistical concerns

Yahoo! News: It’s too late for Stelco Inc. to recover General Motors as a customer in the first quarter of 2005, a spokesman for the automaker said Wednesday, putting to rest speculation it won’t find a suitable and affordable alternative for its steel supplies.

“At this point in time, where we’re focused and where we’re headed is re-sourcing where we know we have a supply of steel,” GM Canada spokesman Stew Low said Wednesday, a day after GM struck a deal to find other steel suppliers in the first quarter.

That deal would see the world’s biggest car manufacturer seek out another steel supplier for the first three months of 2005, then return to Stelco for the rest of the year if Stelco settles some labour and financing issues by the middle of next month.

The agreement reached between two longtime business partners spares GM from having critical steel supplies for parts used in several GM factories, including its Oshawa, Ont., operations, cut off by a potential strike at Stelco’s Lake Erie steel mill. Workers at that mill, which ships nearly 350,000 tons of steel to GM each year, have been without a contract since July 31.

The United Steelworkers union said Tuesday that GM would likely return to Stelco in the first quarter anyway, since the automaker would find spot market prices – believed to be much higher than GM’s contract price – unpalatable.

“The idea that they’re going to go somewhere else and pay more, I don’t believe they are going to do that,” Bill Ferguson, president of the Steelworkers local representing the Lake Erie members, said Tuesday. “They are pragmatic businessmen.”

“We really got to the point where we needed to know, virtually now, where we stand,” Low said. “We do need the time to re-source and we need to set up a new supplier, make sure the logistics are in place, they know where to ship, what products to ship, and all that kind of stuff.

“It’s fairly complex, it’s not just one order,” he added. “It’s multiple plants, it’s going all over North America. So setting it up takes a huge amount of work.”

Low downplayed reports GM would face much higher steel costs based on spot market prices in the first quarter, expressing confidence in skilled GM purchasers in Detroit.

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