Steel Users Speak Out

HEARING ON UNINTENDED CONSEQUENCES OFINCREASED STEEL TARIFFS
ON AMERICAN MANUFACTURERS

BEFORE THE
HOUSE COMMITTEE ON SMALL BUSINESS

July 23, 2002

Thank you for holding this hearing on the unintended consequences of increased steel tariffs on American manufacturers. I am grateful that you are taking the time to hear from the small businesses who have been deeply hurt by the 201 action.

My name is Merle Emery. I am the Vice President and General Manager of G.R. Spring and Stamping. We are located in Grand Rapids, Michigan, and employ 200 workers in the custom manufacture of metal stampings, progressive die, slide stampings, springs, wire forms, and value-added assemblies. Our customer base is 70 percent automotive, 15 percent appliance, 10 percent office furniture, and others. The imposition of steel tariffs have led to uncertainty in supply and price of the steel we need. It has also cost us significant business and has placed us in a price-cost squeeze.

GR Spring requires 20,000 tons of steel each year. With the increased cost and decreased supply of available steel, our service centers have broken their long-term commitments to supply us with steel. This has forced us to buy from the spot market to obtain the steel we need. As a result, our price of steel has increased 20-30 percent.

These increases in steel prices have already cost us a substantial amount of business. For example, soon after the Steel 201 tariffs were put in effect, GR Spring lost a major contract with a well-established customer of ours, to a Canadian company. This Canadian company is now able to purchase its steel for 30 percent less than we can, and this cost advantage was directly reflected in their bid. This customer had never worked with the Canadian company - their decision was solely based on price. We are a $30 million company and this was a $4.5 million contract. This contract was huge for us, but we could not compete on price due to increased steel costs.

The reality of our market is that we cannot pass the additional cost of the tariffs on to our customers. As the example above illustrates, our customers will take advantage of a global economy and buy our product from a cheaper, foreign source. Nor can we afford to absorb these additional costs. These additional costs are so high that they will turn our margins negative and put our company on the road to ruin.

In addition, since the imposition of the steel tariffs we find ourselves faced with uncertainty of both supply and price. We have not been receiving steel when we need it. When we receive steel orders late, this adds to our costs by:

• (1) requiring us to work overtime to deliver to our customer on time;

• (2) requiring us to incur the significant added cost of shipping the finished product to our customers in an expedited way.

We have also been faced with uncertainty of pricing. Because of volatility in the market, our service center suppliers have refused to price steel more than a month in advance. This means that we have to guess what our steel costs will be when we calculate a price for our customers. This is an impossible way to operate a small business.

Our present circumstance must change. We have already lost one sizeable contract and we are in danger of losing more due to the increased steel costs. Furthermore, the uncertainty of pricing and availability for our steel is untenable. Our short-term and long-term viability as a company is threatened.

Thank you very much.