Monday, December 15, 2008

Steel industry would be hurt if US automakers fell

By Steve James

NEW YORK, Dec 12 (Reuters) - The steel industry, already reeling from an economic slowdown that has forced production cutbacks, would suffer a devastating blow if the Big Three U.S. auto companies declared bankruptcy or went out of business altogether, analysts said on Friday.

"If the auto companies go, there will be a cascading effect," said steel industry analyst Charles Bradford of Bradford Research/Soleil. "A lot of parts makers and other companies owe a good deal of money. That's where the exposure of the steel industry is."

Michael Locker of Locker Associates, a New York-based steel industry consultancy, noted about 30 percent of U.S.-produced steel shipments go to the auto industry, either directly or indirectly to parts makers.

"It will have a significant impact in bar and sheet steel production," he said of a collapse in U.S. auto manufacturing. "It would mean a contraction of the steel industry."

We have already seen a significant negative impact on steel sales in the UK as a result of problems in the automotive sector. Not only have falling car sales hit the steel industry, but the withdrawal of credit insurance on car makers and the component supply line is the cause of a collapse in business confidence.


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