Wednesday February 01, 2006

Material costs put heat on business

peakoil.com -> mlive.com :

Manufacturers and service providers alike are caught in a vise grip between higher commodity prices and customers who "just say no" to paying more. The costs of fueling a truck, heating a plant and lighting an office are expected to remain high, bringing new challenges and expenses for businesses in virtually every sector.

The U.S. Department of Energy is forecasting higher demand will contribute to tightened supplies and raise prices for oil and gas. Rising natural gas prices could force more manufacturers to move production to countries where energy is cheaper and more widely available. Likewise, rates for electricity also are expected to climb as demand increases and the prices of fuel for plants, including coal and natural gas, also rise.

Manufacturers are squeezed between rising material prices and customers stiff-arming them on any price increases. This is the year that companies will have to make hard choices. The pressure has grown so intense that some suppliers are getting tough with penny-pinching customers. Lear Corp has sued DaimlerChrysler to get paid more for its auto-interior parts. Lear threatened to stop shipments when the automaker refused to pay more for Lear's trim, products hit by both high steel and resin prices. The lawsuit was settled out of court.

Grand Rapids Chair Co. also has seen prices rise across the board - for wood, steel and plastics, said Tom Southwell, a partner and vice president of sales. "Commodities seem to be changing so rapidly that we have price books printed, our costs change, and it comes right out of the bottom line," he said.

(2006-02-01 14:39:24 SGT) [Biz] Permalink

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