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The obvious effort here by Platinum will be to create a stable, smaller, capable parts supplier to US based automakers. This goal will call for additional cuts in plant and personnel as Delphi works to emerge as a viable parts supplier with desirable returns for the Platinum investors.

What I believe remains to be seen is how many smaller auto parts suppliers, especially Tier II, III, and IV can survive the current production drops of GM and Chrysler. Additionally, those who are on the edge will be especially vulnerable to payment delays which are the norm during a time of ownership transfer. This latter issue is what worries me most; how long can the smaller, undercapitalized auto suppliers last? Many won’t.  Yes this will result in delays and line outages. However, since it seems the prospective car buyer is not rushing to the showroom… intent on purchasing a car today. Rather, there is a nagging lethargy tothe potential car buyer as they approache the showroom today. Until automaker inventories decline significantly I believe most auto producers are more focused on their own survival. This focus means that long term relationships get discounted in our current environment. Sadly be prepared to hear more comments like, ‘What have you done for me lately?”

ABC Metals continues to focus on mutual survival techniques; resulting in ’Win/Win’ scenarios not ‘Take it or Leave It’ conflicts. Call us today and let us ’Uncoil the Power’ of ABC Metals, together.

Metal prices closed higher yesterday following a sharp rally in the price of crude oil; near $66 bbl. The dollar also weakened adding to the commodity movement.  Economic data out of the US was mixed yesterday as Durable Goods order rose a nice 1.9% in April, but prior numbers were revised down.  New Weekly Jobless claims data did not surprise, but continuing claims rose; an indicator of how quickly the unemployed are finding jobs or rather not finding jobs.

China’s economy is expected to expand by 7.5% this year up from a 1st Qtr of 6.1%. It appears China’s massive stimulus plan is having some positive effects. Its stimulus strategy is much different than the US with their plan being front-loaded. Thus the near term positive effects are not unexpected. As for the long term.. time will tell.

As of this writing, the author of this blog continues to look in vain for the ‘green shoots of recovery’ spoken of by Fed Chairman Bernanke in the labor and housing sectors. Still, it seems we have pulled out of the economic dive we were in…for now we seem to be ’skimming the treetops.’  No room for error as companies endeavor to avoid a financial crash. I would really like to get some room…altitude between me and the ground right now. Also known to some as a recovery.

Initial opening numbers in the metal markets indicate a gentle nudge higher today. Stay current by visiting our website @ www.abcmetals.com.

Inside Indiana Business- an online business Journal is reporting today that GM and the UAW have reached an agreement that is expected to result in GM assuming ownership og Delphi Electronics & Safety in Kokomo.

Delphi continues to mute it response regarding what plants GM is interested in purchasing. While this would be good news for Indiana; one still wonders what will remain of Delphi after June 1st.

ABC Metals as a copper and brass flat-rolled supplier remains keenly interested in the financial health and future of the US automotive supply base.

Interestingly Bloomburg.com noted on 5/21/09 that the US Government has said it has the right to block GM from contributing further to Delphi. http://www.bloomberg.com/apps/news?pid=20670001&sid=ar76BQD2FD9Y

Delphi is quoted in RubberNews.com as stating, “If we cannot remain in compliance…our lenders…may seek to foreclose upon substantially all of our assests and proceed toward a sale or liquidation.” These comments can only stike fear in the hearts of Delphi Suppliers; who are already reeling in this current economic downturn.

It appears that the future of an American Icon will be known shortly.

The e-newsletter ‘Inside Indiana Business’ reported this past Wednesday that a company considering to purchase Sumco has let its exclusivity agreement expire. It appears that Sumco; a major supplier of electroplating to the Automotive sector will continue to operate … at least through the end of this month.

With the shudown of production at many Chrysler facilities, a ‘9 Week’ shutdown at approx 13 GM plants, reduced or severely curtailed production at the ‘New Domestics’ like Toyota and Honda; the automotive sector is very fragile right now. We will continue to ‘blog’ regarding what we believe to be newsworthy items- keeping you posted by staying connected.

http://www.insideindianabusiness.com/newsitem.asp?id=35564

Copper futures moved upward 5% or 10 cents to $2.19/lb on the Comex division of the NYME. This surge followed positive economic news released today- ADP released figures indicating US employment fell by just under 500,000 jobs- the lowest decline in 6 months. Additionally mortgage applications grew by 2%. It seems that the overall economic sentiment might be turning in a more positive direction; even on the heels of GM’s announcement to idle most of their assembly plants for up to 11 weeks this summer. Still, Gold’s climb is leading to some concerns regarding inflationary fears; we will watch and see.

Scrap remains tight as China continues to purchase scrap at a near term premium.

http://www.marketwatch.com/news/story/story.aspx?guid=%7BEE26A69E%2D7080%2D4401%2D95E8%2D4A765DD0617E%7D&siteid=rss

The Wall Street Journal, CNN and many other news outlets are reporting today that GM plans to idle most of its plants this summer for two months.  This announcement follows yesterday’s notification that GM will skip its June 1st debt payment of $1B.  The automaker continues to be burdened with excessive inventories; 113 day supply of  cars and 123 day inventory of trucks.

Sadly the impact to the Automotive Supply base will be deep and hurtful. As more and more Auto Suppliers seek bankruptcy protection daily- this is surely bad news for those suppliers already on their heels.  Surely all participants in the supply chain will want to review their raw & finished good inventories now- then monitor going forward. As suppliers act to minimize their risk, be aware that ABC Metals is here to assist.  Call ABC Metals regarding inventory conversion and lower your exposure to market pressures. See also http://online.wsj.com/article/SB124041946006244177.html

For years anyone who slits, tins, forms, stamps, shapes, or otherwise processes flat-rolled product have struggled at times with flatness issues.  I have found a nice online article about Flatness and Leveling @ http://www.thefabricator.com/CoilProcessing/CoilProcessing_Article.cfm?ID=436. The source is trade magazine “The Fabricator’  a industry source I have subscribed to for years. I believe you will find this article a solid, clearly written source of information regarding the struggle we all fight with flatness issues.

Please note ABC Metals can roller level and/or tension level flat rolled product ‘In-House’ with short lead times available. Tension leveling is our preferred solution to most flatness requirements. For more information please contact us at 800-238-8470 or on the web @ www.abcmetals.com

Since we broke out of the $1.40-$1.60/lb COMEX trading range we have seen Copper brush $2.20/lb. Published comments regarding, ‘Why?’ point to a seasonal spring rally, improved sentiment and results in the financial sector, and Chinese policy practices of hedging their dollar portfolio by commodity conversion.  Lastly, rumors of Chinese restocking of strategic reserves has fueled the current spike in the metals market.

In spite of the current Copper uptick, there is concern here at ABC that prior (weeks old) dismal commodity price forecasts remain hard to dismiss. We likely will see these current prices fizzle by late summer. Still, the new average price will be higher as the Global Economy improves.

Aluminum prices are depressed. While Carbon Steel, Stainless, and Aluminum scrap prices remain low and flat.

Weds April 15th AMM (American Metal Markets) featured an article disclosing that a growing number of copper and brass servicenters are pulling in their credit terms as they fight to survive. One Servicenter Executive commented, “We’re having to tell more and more people they’re on COD–it’s not worth selling if you’re not going to get paid.”

Although some servicenters are trying to work with their customers; taking them to court remains an option. Court is always a last resort, but with the demise of Guardian Metals and the closure of AJ Oster’s Allentown, PA facility, it is apparent; cash is king and key to survival.

The article continues, ” …many red metal distributors are returning to square one and denying credit from the get-go if they catch even a whiff of default.” With a GM Bankruptcy becoming more likely and Delphi’s credit arrangement expiring in June; the supply base is increasingly vulnerable and prone to failure.

My advice: Protect your current term arrangements with your suppliers. First- Pay on time and in full. Second-If you must be tardy- communicate! They will likely work with you to manage through these tough times.  Third-Convert old/obsolete raw material inventory into cash. The copper scrap market is up 43% from Feb EOM. Turn your inventory and get the cash. Lastly- only order material that you can turn quickly- flip your inventory in 1 week or less- don’t stock- you may pay more but your cash flow will be much lower.