THE UNINTENDED CONSEQUENCES OF INCREASED STEEL TARIFFS
Submitted to the
My name is Nels Leutwiler and I am the CEO of Parkview Metal Products, a 52 year old, family owned and run metal stamping company headquartered in Chicago, Illinois. I thank you for the opportunity to submit testimony on the unintended consequences of increased steel tariffs on my company.
Parkview Metal has four plants in the United States and one plant in Mexico. We make metal components for Sony big screen televisions, which Sony assembles in their plant in Pennsylvania. Well over 50 percent of the cost of the parts we produce is the metal itself. Parkview's 2002 pricing to Sony was based upon purchasing steel, per our agreement with Worthington Steel, our service center on these items, for $0.2145 per pound. In late March, after the Steel 201 tariffs were implemented, our service center immediately imposed a significant price increase on our orders, to $0.2905 per pound. To make matters worse, they couldn't secure adequate quantities, so we were forced onto the spot market where prices were even higher. The universe of suppliers we can use for this product is limited due to quality issues.
We went back to Sony with a price increase, which they reluctantly accepted, enabling us to pass through most of that initial increase. At the same time, Sony understandably vowed to search for other sources that weren't subject to the tariffs.
Now, as the attached e-mail states, Bethlehem Steel, which supplies our service center, is pushing out orders and forcing us back on the spot market. Parkview Metal is now paying $0.3495 per pound. We will lose money on every part we ship at this price. We have no option but to approach Sony for pricing relief again.
The likely outcome of this is that the parts will be re-sourced to someone out of the country, to a company that doesn't have to contend with the steel tariffs. The United States government, in its infinite wisdom, has effectively diverted imports of steel to downstream products incorporating steel. Ultimately, these steel pricing and supply issues are just going to expedite the transfer of the entire Sony big screen product line to China or some other country where parts manufacturers can take advantage of globally competitive steel prices. These components are vital to Sony's production in Pennsylvania - without them, they cannot build the product line. In short, not only are the U.S. parts manufacturers like me at risk, the future of the Sony assembly plants in the U.S. is in also jeopardy. Many U.S. jobs will be lost.
This is simply one real world example of the threat that the steel tariffs pose to an American small business. The current steel market crisis has dramatically impacted our business in other aspects as well. We have been forced to absorb increases in labor costs in overtime premiums due to raw material availability and lead times infringing upon total required manufacturing time. In too many instances, these delays have resulted in premium or airfreight costs required to meet customer demand. It is hard to fathom that such a result could have been intended.