Rising shipping costs may see GM source closer
DETROIT, June 26 (Reuters) - General Motors Corp GM.N may look to source some materials or parts closer to the United States because of rising shipping costs, a senior executive said on Thursday.
Bo Andersson, group vice president in charge of GM's global purchasing, said the automaker may look at it on a "case-by-case" basis.
He said half of the cost of shipping materials or parts is based on the price of fuel.
"Example, typically it costs us $2 to ship a radio from Asia to U.S. It's not a big thing." Andersson said. "It costs us $20 to ship a wheel from China to US. So it's case by case."
Andersson said a weaker U.S. dollar was aiding U.S. suppliers, who have been hurting from high raw material prices and competition from low-cost foreign rivals.
"With the fall of the dollar, U.S. suppliers are more competitive on a global basis," Andersson said.
GM's global annual purchasing budget is about $94 billion, with $58 billion for North America, according to the automaker. The figure includes $33 billion for the United States alone.
Struggling with a declining U.S. auto market and rising costs for health care and other benefits, Detroit's automakers have pressured suppliers to reduce prices in recent years, pushing many parts makers into bankruptcy.
Andersson said the rising price of raw materials could force automakers to rethink the design of cars or use alternative materials.
"If things are getting more expensive, you may need to have different designs and may need to replace things with something else," he told reporters on the sidelines of a supplier forum. "When you have tough times, you question things."
Andersson declined to comment on an upcoming decision on a battery contract for GM's Chevy Volt plug-in electric car that has been approved for production in November 2010.
Compact Power Inc, a unit of South Korean company LG Chem (051910.KS) and German auto parts supplier Continental AG (CONG.DE), adapting battery technology used by privately held A123 Systems, are vying for the Volt battery contract. (Reporting by Poornima Gupta; Editing by Tim Dobbyn)
