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