August 29, 2018 / 9:37 AM / 3 months ago

Steelmaker Voestalpine defies Trump's tariffs with production shift

VIENNA (Reuters) - Austria’s Voestalpine is shifting part of its production for the automotive industry from the United States to Mexico to avoid President Donald Trump’s tariffs on imported steel, its chief executive said.

FILE PHOTO: Wolfgang Eder, CEO of Austrian specialty steelmaker Voestalpine, talks during a Reuters interview in Linz, Austria, August 24, 2017. REUTERS/Heinz-Peter Bader/File Photo

The steelmaker specializes in making finished parts for the automotive and rail industries and generates 1.3 billion euros ($1.5 billion) in annual sales in the United States, a tenth of group revenue.

Most of Voestalpine’s 48 U.S. sites work with domestic steel, but one third of its revenue there relies on imports because some of the flat steels used in car parts and special alloy are not available.

As Washington imposed tariffs of 25 percent on steel imports from the European Union, Canada and Mexico in June, Voestalpine decided to move part of its assembly out of the United States, Wolfgang Eder said.

“If I have an empty hall in Mexico, which can be easily rented at any time, then I can install the machines needed for assembly fairly quickly,” Eder told Reuters.

He said the move will be completed in the autumn, without elaborating or quantifying the expected cost savings. “Things are fluctuating too much,” the 66-year-old said.

Voestalpine and other companies have filed requests to be excluded from the tariffs in certain cases. The Austrian company has filed around 3,000 such requests and has so far received 37 responses. “Two thirds are negative, and one third is positive.” However, it was too early to recognize a pattern, he said.

Despite Trump’s initial threat to impose a 20 percent tariff on European Union-assembled cars, U.S. drivers’ appetite for BMW, Daimler and Porsche (VOWG_p.DE) cars remains strong, Eder said.

Voestalpine has close ties with German carmakers. It followed them in expanding production overseas years ago.

Encouraged by the new NAFTA deal, the CEO expects renewed negotiations between the Trump administration and the European Union regarding auto tariffs within weeks.

Eder, who will step down in summer 2019 and hand over to steel division chief Herbert Eibensteiner, said he saw increasing interest from Chinese and U.S. carmakers for Voestalpine’s parts. Orders from the likes of SAIC and Ford could boost its sales in the world’s top two auto markets.

However, Eder aims to keep the company’s share of the market at around one third and diversify into the energy sector, which generates 15 percent of sales.

He aims to take advantage of new oil and gas exploration activity in the Eastern Mediterranean with steel grades developed for deepsea pipelines.

“Thanks to our new technologies, it is now possible to exploit oil and gas sources which have been inaccessible in the past.”

The chief executive said he is confident that his successor will achieve the goal to reach annual revenue of 15 billion euros he had set for 2020/21.

“If we manage to reach more than 13 billion euros in revenue this year as forecast (by analysts), then the 15 billion euros are not an unrealistic goal.”

Writing by Kirsti Knolle, editing by Louise Heavens

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