Hydro Expects Further Aluminium Production Cuts After GM and Chrysler Announcements

Hydro does not rule out further reductions in its production of extruded aluminium automotive components and systems as result of the announcements that automakers General Motors and Chrysler are suspending vehicle production at most of their assembly plants in North America.

GM announced in late April that it would idle 13 of its assembly plants in the United States and Mexico for up to nine additional weeks this summer, starting this month. Chrysler followed on April 30, on the day that it filed for bankruptcy protection, stating that it would suspend production indefinitely at all its US and Canada-based plants, beginning May 4.

Hydro delivers extruded aluminium products to each of these automakers, either directly or indirectly, from four plants in North America. These are mainly precision tubing products for heat transfer applications, and bumper beams for crash management systems.

The announced closures will, first and foremost, impact the automakers' Tier 1 suppliers. In the precision tubing business, Hydro is a Tier 2 supplier. The company has three precision tubing plants in North America - two in the US and one in Mexico.

"The impact on the tubing part of our business will not be as direct, but because our customers will not have any cash flow coming from these major customers, the decisions to suspend production will clearly affect our operations, too," says Salvador Biosca, who lis responsible for Hydro's automotive business. "We are talking with our customers regularly and evaluating our situation."

Hydro's automotive structures plant in Michigan is a Tier 1 supplier, delivering aluminium bumper beams for assembly in vehicles manufactured by General Motors. Consequently, GM's decision to stop production will have a direct impact on the Holland plant, which has about one-third of its business with the company.

The plant does not deliver parts to Chrysler.

"The production volumes at our plants in North America are already reduced, but we cannot rule out further reductions as result of these stoppages," says Biosca.

Caution in Mexico
Hydro announced on April 1 that it would be closing one of its precision tubing plants - the Adrian, Michigan facility - by the end of this year. The announcement came prior to the news from GM and Chrysler.

Biosca says Hydro has already begun the process of moving the production from the Adrian plant to sister sites in Rockledge, Florida, and in Reynosa, Mexico. This process has been slowed somewhat by the flu epidemic in Mexico.

"Our caution is affecting the move to Reynosa, but this is an exceptional occurrence. What is important is ensuring the safety of our employees," he says. "We don't expect this to lead to any significant delay of the closure process."

Hydro is the global market leader in the field of aluminium solutions for automotive and non-automotive heat transfer applications, including air-conditioning systems. The company is also the leading supplier of extruded aluminium bumper beams, delivering to most of the world's largest producers of passenger vehicles.

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