With iceman on the way, US plants and suppliers get ready – RTRS 11/20/2014

With iceman on the way, US plants and suppliers get ready – RTRS

 

20-Nov-2014 06:00

 

(Repeats to additional subscribers with no changes to text)

    By James B. Kelleher

    CHICAGO, Nov 20 (Reuters) – U.S. Steel is stockpiling extra

iron ore ahead of what could be another record-long freeze-up of

the Great Lakes.

    General Motors has built up inventories of critical parts at

its plants and established a supply chain “crisis room” that

will swing into action in the event of a major winter storm.

    Con-way Freight is issuing strap-on cleats to its drivers

and dock workers.

    The blast of unseasonably frosty air gripping much of the

United States has served as a reminder of the polar vortex that

sent a chill through the U.S. manufacturing sector last winter,

causing part shortages and plant closures and triggering a 2.1

percent drop in first-quarter gross domestic product.

    Manufacturers and their suppliers are scrambling to avoid a

costly repeat if this frigid autumn morphs into Polar Vortex II.

Companies are stockpiling parts at factories, increasing the

amount of goods in transit, reviewing weather contingencies with

their freight carriers and booking extra trucks and trailers so

shipments do not get sidelined by nasty storms.

    The precautions will add hundreds of millions of dollars in

cost, supply chain experts estimate, and could temporarily

depress the sector’s profits. But Whirlpool <WHR.N>, General

Motors <GM.N>, Ford Motor Co <F.N> and Con-way <CNW.N>, and

other companies contacted by Reuters said they aimed to avoid

the even more costly disruptions, like those that hit in early

2014. 

   “It’s an insurance policy,” said Chad Moutray, the chief

economist for the National Association of Manufacturers.

    Companies such as U.S. Steel <X.N> believe they have little

choice. The country’s No. 2 steel producer is moving a key raw

material, iron pellets, south and increasing the volume of

semi-finished product at steel works around the country.

    Last winter, locks on the Great Lakes froze for 145 days,

more than double the usual 62, and at one point in March more

than 90 percent of the lakes’ surface was under ice.

    That stranded raw materials and cut production and shipments

of flat-rolled steel alone by 344,000 tons during the first

quarter, a six percent drop compared with the same period of

2013, according to U.S. Steel.

   

    WINTER FLOAT

    CEO Mario Longhi says the Pittsburgh-based company is

“definitely preparing operations for a longer period of shutdown

of the locks” this winter, which “will consume an additional

level of cash.”

    Freezing weather forced Ford to idle several facilities last

winter just as the company was kicking off the biggest year of

new model launches in its history.

    This year, Ford has added what company planners call a

“winter float” to its just-in-time production plans. The

approach puts extra parts in transit and allows additional time

for the parts to arrive at plants.

    GM has identified high-risk regions, in terms of supplier

locations and logistics routes, and is monitoring them round the

clock from a crisis center for any weather-related disruptions.

It has also added extra snow removal equipment at its

distribution centers.

    Whirlpool, meanwhile, is talking to non-rival consumer goods

companies about sharing space on delivery trucks in the event of

a weather emergency. The company is also investigating

short-term trailer rentals in case of winter capacity

disruptions.

    The efforts come as some leading meteorologists are

predicting another icy and disruptive winter.

    The Commodity Weather Group, which sells forecasts to

farmers, believes this winter could be even colder than last

year. Forecasters at AccuWeather and National Weather Service,

though less worried about a broad repeat, are predicting

below-average temperatures and heavy snowfall in the

south-central and southeastern states, home to many auto

assembly plants.

    That region was especially hard hit last year. When two

inches of snow fell in Atlanta in late January, thousands of

drivers abandoned their vehicles, gridlocking area roads for

days.

    Kurt Kuehn, the chief financial officer of Atlanta-based

United Parcel Service Inc, says weather will be a wild card,

threatening traffic snarls during the company’s peak season.

    “It’s very hard to move goods if highways are clogged.”

    Con-way Freight is changing the fuel mix in its on-site

storage tanks, after last year’s cold snaps made diesel fuel in

some locations so thick it would not pump. The company, which

delivers parts for the automotive, heavy manufacturing and

chemical sectors, also is issuing cleats to drivers and dock

workers, so they will not fall in icy conditions.

    “We learned a lot of lessons from last year’s polar vortex,”

says Gary Frantz, a company spokesman.

 

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