Surging steel prices cost automakers $500 more per vehicle
A few years ago, high(ish) gas prices and fierce competition had Detroit automakers talking about the "perfect storm" that the domestic industry was facing. Fast forward to 2008 and the entire auto industry, not just U.S. automakers, is in a full-blown tsunami. Gas is $4 per gallon, the U.S. is muddling its way through some seriously wobbly financial times, and now the price of steel has nearly doubled in five months to $1,035 per ton. Since just this January, the cost of steel in your automobile has risen $500 per car. The reasons for the sharp incline in prices includes both the increased cost of energy for steel makers and higher demand for the strong stuff coming from rapid growth in countries like China and India.
With everybody feeling the pinch of high materials, which also includes sharp increases in platinum and aluminum, suppliers are passing these costs on to OEMs, who in turn will be passing them on to us. That means we may soon be paying a lot more for our next vehicle. With rising gas prices, inflation, and a weak U.S. economy, car customers appear to be experiencing their own little thunder storm, too.
[Source: Automotive News - sub. req'd]
Reader Comments (Page 1 of 2)
MJK 11:42AM (6/02/2008)
This to will be passed on to the consumer....oh goody.
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matt 11:35AM (6/02/2008)
RECESSION!!!!!!!
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Mike 12:24PM (6/02/2008)
Not a recession, supply and demand.
People are buying less (gas, fuel, food) because of increased prices due to increased demand. The cost crunch on communities will be alleviated by people reducing their fixed costs through consolidation of populations (ditching houses and cars and moving to cities) and changing the focus of their economies (from farming to manufacturing, mfg to technology, tech to R&D, and so on)... all while migrating to metro areas. It happened for hundreds of years, then the Roman empire fell. It's been happening now for hundreds of years...it's socio-economic evolution on a global scale.
The world is becoming a smaller planet.
hashiryu 12:31PM (6/02/2008)
and housing in metro areas become more expensive, pollution in these are or the cost to keep it in check rises, etc, etc.
So It's not a global socio-economic revolution, it's a global recession, and when it bounces back, it is going to make a lot of people very very rich.
Vintage 11:39AM (6/02/2008)
Buy used. Problem solved. Not to mention keeping older cars on the road as long as possible is the best way to reduce your carbon footprint.
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Disgruntled Goat 3:06PM (6/02/2008)
Problem not solved. Higher new car prices + more demand for used cars = higher used car prices.
Vintage 3:31PM (6/02/2008)
No, it's still solved. New cars are a retarded way to lose thousands of dollars in the first few years of ownership, guaranteed. Spend a very minimal amount on a used honda or something, and you will have very few problems for a very very very long time. So... I could spend 25k+ on a new accord... or... I could spend $4,000 on a used accord. The fact that you not only save $21,000 but you also avoid depreciation makes it a no brainer. New cars are for either rich or stupid people.
Bungle 11:42AM (6/02/2008)
So, maybe now auto makers will finally learn a lesson and start putting more money into research to lower the production costs of lightweight materials like carbon fiber. That will solve the problem of high steel prices and raise fuel economy simultaneously (not to mention improve acceleration, handling, braking, etc., etc.).
I, for one, would *love* to stop talking about 3000 lb. cars as "lightweight."
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Galley 11:45AM (6/02/2008)
I can't fathom how my PT Cruiser weighs 3,000 lbs. No wonder it needs a 2.4l engine.
zmf001 12:50PM (6/02/2008)
Bungle, I am with you on the 3000lbs remark.
Why is it my only two choices for a sub-2000lbs car in the US are a Smart ForTwo or a Lotus Elise? Safety features add weight, "exotic" materials are expensive. I would gladly pay 20k for a Smart ForTwo with a real transmission and a better engine. I would also pay full price for an Elise even is it only had a 1.6L 100hp motor, or ... gasp ... a diesel!
tankd0g 11:53AM (6/02/2008)
So that means we get an extra $500 on resale now for the added scrap value right?
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Alex 11:53AM (6/02/2008)
c'mon 1992 nissan maxima, keep working for me!
I guess this really can't come as a surprise. Hopefully this will lead to greater R&D funds for new materials. CF being one of them. This could also lead to non-structural parts like body pannels going to composite materials like fiberglass (again) or plastics.
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Vintage 12:37PM (6/02/2008)
A car continues to keep working as long as you continue to fix it. I have 265,000 on my 89 accord, and I'm not planning on ditching it. When something goes wrong, you FIX it, instead of throwing it away. I hate America's disposable culture.
zmf001 12:59PM (6/02/2008)
Alex, a lot of cars already use materials to get the weight and cost down, but not enough. Saturn has used plastic (dent resistant) body panels for years, as do many other manufacturers. I think you are right though, many companies will be doing this more extensively to try and reduce weight and save costs.
Noidor 12:04PM (6/02/2008)
I still cannot get over the fact that GM was saying earlier this year that it does not see recession, at the time of their statement we were already into it!
Lastly, all these reasons are going to lead to Chrysler's demise. It's a goner...
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Brent 12:21PM (6/02/2008)
You are clueless.
mroverlord 7:30PM (6/02/2008)
Is that why Chrysler has seen signifcant overseas sales increases?
Chrysler was in FAR worse shape back in the 70s, and they got out of that one.
Noidor 7:27AM (6/03/2008)
Define significant? Their footprint is present overseas, no debate their, albeit it's an extremely small one. I also don't think their product line-up has a chance. Chevy, Skoda, Kia, Hyundai, got Chrysler beat in every single category. Only good thing they got is a minivan and a 4x4 with diesels.
Glenn 12:20PM (6/02/2008)
I think this will lead to increased steel production world wide if anything. Maybe some US steel plants will reopen.
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Noidor 12:23PM (6/02/2008)
No, high steel prices are not a result of increased consumption from China and India within the past year - rather it is merely a function of a worthless dollar. Same with oil too. Just wait, once exporters of commodities will stop pegging their currency to the dollar (despite best PR attempts of Paulson to prevent that from happening), everything is going to skyrocket.