Timothy Tindall, President
Hearing Concerning Investigation 332-452,
"Steel-Consuming Industries: Competitive Conditions with Respect to Steel Safeguard Measures"
United States International Trade Commission
June 19, 2003
Re: Steel-Consuming Industries: Competitive Conditions with Respect to Steel Safeguarding Measures, Investigation No. 332-452
Dear Madam Secretary:
Spring Engineering and Manufacturing Corp. is a $12 million supplier of metal stampings, springs and small assemblies to the automotive marketplace. We are a family business that was started more than 50 years ago. We employ approximately 90 people in one facility in Canton, MI.
Strip and wire steel products comprise approximately 35% of the total cost of the parts we manufacture. We buy steel both domestically and from foreign sources with the overwhelming portion domestic.
Since the imposition of the steel tariffs in March of 2002, we have experienced a sharp increase in all steel products that we buy, averaging between 20-30%. We also experienced spot shortages in several critical products that forced us to pay even higher prices in the spot buy market.
The tariffs also negatively impacted our quality levels of incoming material because of having to either buy from a lowest-priced inferior supplier or from a totally unknown spot buy supplier.
The variability in quality of this steel creates additional costs to us beyond just the price. We are forced to increase our levels of incoming inspection and testing as well as increase our time to set or reset our machines to adapt to the different materials. Our final output is also impacted by higher final part rejection rates. As you can see, the direct price increase of 20-30% was only part of the increase in total costs caused by the tariffs.
The most serious impact of the steel price increases for our business is that we are totally unable to pass the increase on to our customers. We have had to absorb the entire material increase, which impacts 35% of the total cost of the each part. After experiencing severe and increasing global competitive pressures during the past five to six years, our pricing is already at minimal profitability. In many cases, the increases in steel pricing put us at zero profitability or even a net loss. The choice for us was either to except these conditions and hope that the tariffs would be rescinded, or exit the business in total.
The steel price increases have also impacted this company's ability to compete for new work. We are forced to compete with all global competitors, but not able to buy steel at the most competitive prices. This gives my competitors an automatic advantage. The net result is that we are not able to gain future work because of our current steel prices. If we cannot grow with future business, we cannot hope to remain financially viable long term.
In our case, the steel price increases have severely impacted our financial condition. We were not profitable in 2002 and do not expect to be profitable in 2003. As a small supplier, we cannot expect to sustain losses of this magnitude and stay in business.
In a larger sense, the entire steel consuming manufacturing sector, of which we are a part, is at a critical tipping point, both in the Midwest and nationally. The U.S. manufacturing base has been steadily declining. We have lost more than two million jobs over the past three years. The steel price increases from the tariffs have only worsened a bad situation for manufacturers.
Spring Engineering is a high quality, competitive leader in our industry. We produce domestically and ship globally. We have maintained our position by investing in people and the latest technologies. We cannot, however, offset artificially driven material price increases that our customers will not accept.
Current statistics indicate that for every one steel-producing job positively impacted, the steel tariffs have negatively impacted 57 jobs in steel-consuming industries. The high paying manufacturing jobs that we are losing are going away forever. In its most basic sense, the tariffs are making a very serious national economic problem even worse.
Manufacturing does matter. It is the basis of our technological leadership, our national security and one of the critical drivers of our economy and employment. It is, without a doubt, one of the largest factors that sustain our middle class standard of living. It needs to be grow not decline.
The tariffs have had very large, and I'm sure unintended consequences for this important segment of working America and small business. I hope you will thoroughly review the full impact of the tariffs on steel consumers, and I urge you to recommend rescinding them at the earliest possible date.
Thank you for the opportunity to testify.