ArvinMeritor Inc. announced plans May 13 to initiate a new commodity surcharge starting June 1. “As a result of the sudden and extraordinary surges in the price of steel, energy and other commodities, we are implementing a monthly review and adjustment process on all products,” says Chip McClure, chairman, chief executive officer and president of the Troy, Mich.-based company. “We have a portfolio of complex products that require varying levels of commodities. We plan to adjust the surcharge as appropriate for each product line.”
In ArvinMeritor’s second-quarter earnings report issued on April 29, the company stated that the unprecedented volatility in the commodity markets – including a global shortage of scrap steel, a rapid escalation in the price of critical raw materials such as iron ore, coking coal and metal alloys, and higher fuel and energy costs – would require it to take recovery actions to mitigate a significant impact to the company’s financial results.
“We remain diligent in the performance improvement actions and cost reduction initiatives we are driving throughout our worldwide operations, but these will not be enough to offset the level of cost increases we are experiencing,” McClure says. “Our global team has worked hard to improve the company’s financial results, and we have the responsibility to take the necessary actions to protect our bottom line.
The Commercial Vehicle Systems and Light Vehicle Systems business groups have conducted an extensive analysis to determine the magnitude of this situation and its potential effect on the business, McClure says. “Results of that analysis clearly indicate that immediate actions are necessary,” he says.
The company has begun discussions with its customers prior to implementing the surcharge.