Steel Tariff Debate Escalates: Auto Future an Issue for Federal Hearing Today

A heated dispute over the future of U.S. manufacturing hits a federal trade panel today, which will hear arguments from steel companies and automakers on whether tariffs on certain types of steel widely used in cars and trucks should be removed. The debate pits six large automakers against the three largest U.S. steel companies, each using a form of economic jujitsu to make its case.

Posted: Oct. 17, 2006, 9 a.m., EST

From Detroit Free Press

WASHINGTON — A heated dispute over the future of U.S. manufacturing hits a federal trade panel today, which will hear arguments from steel companies and automakers on whether tariffs on certain types of steel widely used in cars and trucks should be removed.

The debate pits six large automakers against the three largest U.S. steel companies, each using a form of economic jujitsu to make its case.

In dueling news conferences Monday, the automakers said the tariffs protect an increasingly healthy U.S. steel industry that has steadily raised prices, while steelmakers said their recovery would be swamped by foreign competition should the tariffs end.

The automakers — General Motors Corp., Ford Motor Co., DaimlerChrysler AG, Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. — and their suppliers have won the backing of several members of Congress. Ten senators sent a letter to the U.S. International Trade Commission on Monday saying the tariffs were "outdated."

The ITC will hold hearings today and Thursday and is expected to rule in December. The tariffs have been in place since 1993, after the steel industry accused producers from Australia, Canada, France, Germany, Japan and Korea of selling their products below cost in the United States.

The case involves corrosion-resistant, or coated steel, used in everything from the hood of vehicles to heating ducts. The steel industry considers it one of its most lucrative products, with demand growing especially in developing nations such as China.

About half of the coated steel sold in the United States ends up in cars and trucks. Automakers say thanks in part to the tariffs, coated steel prices have risen from $496 per ton in 2001 to $729 this year and have raised auto-industry costs by $3 billion over the past 2 1/2 years.

Two purchasing executives with GM and Nissan said Monday that the largest steelmakers had flexed their market power over the past couple of years, turning down business and even shutting plants to keep supplies low and prices high.

"The steel industry will commonly reduce production rather than accept lower prices," said Cal Vickers, senior director of purchasing for Nissan.

The three largest steelmakers — U.S. Steel Corp., Nucor Corp. and Arcelor Mittal — say their profits have rebounded but they are by no means stable. All pointed to increased production by China, where raw steel capacity rose 28 percent last year, as the largest threat to other steelmakers.

"Far too much capacity is being built, especially in China," said Dan DiMicco, chairman and chief executive of Nucor. "These tons will need to find a new home."

Leo Gerard, president of the United Steelworkers union, which has 1.2 million active and retired members in the United States and Canada, said a portion of the steel industry’s profits are being diverted to fund health care for 250,000 retirees who had lost coverage in the industry’s downsizing over the last decade. Ending the tariffs would have a "life and death impact" on those retirees, he said.

"I couldn’t begin to tell you how much I resent the position the auto industry has taken," Gerard said.