Monday, May. 15, 1939
Buying Week
Detroit's favorite alibi for bad business is "the weather." Last week although the weather was mild enough for the baseball season to get into its stride, motor makers bemoaned it. Car assemblies fell to 71,000
--en route to zero as the time for model changes approaches.*But if the motor industry's sales were small, last week its purchases--of one material, at least--were big. The buying power of Detroit itself is in the hands of auto purchasing agents, the best bargain hunters in big-time business. To them every posted price is a target to snipe at. They did their 1938 steel buying in two big lots, each time at their own price. Using as bait bigger orders than the steel industry has seen in some time, they are again angling for a steel price cut. Back in the days of Judge Gary, neither Henry Ford nor anyone else argued about the price of steel. Today the price is Detroit-minus instead of Pittsburgh-plus. Last week,. however, Detroit purchasing agents were working on copper; this week they are getting around to steel.
Last time the price of copper moved was in October 1938, when it went up, with business hopes. Had purchasing agents been as shrewd as they are tough, they would have finished loading up in July and August when prices were low, instead of waiting until October. As it was, the auto companies had to come back for more when the assembly lines began to roll out the 1939 model in October. They had no choice but to buy at the copper companies' upped price of 11 1/4-c- a pound. Fearful that the price might go higher, they then stocked up with enough to carry them through till April.
Last week they had their revenge. March business had dropped back to the August rate and the "outside" copper dealers, feeling the pinch, let the price down to 10 1/4-c-. The big producers, however, refused to follow, preferring to keep the price split, since the independents do not have the capacity to handle much business. Finally, early in April, American Smelting & Refining cut its product to 10 1/4-c-, halfway between the independents and the other big producers, forcing the big producers to follow them down.
Canny Detroit buyers refused to bite, however, decided to wait out the copper companies. Within a few weeks American Smelting's price was down to 10-c-. Still most purchasers waited. Then fortnight ago Phelps Dodge jumped it back to 10 1/2-c-. This priced the industry's No. 3 unit out of the market, but enabled Anaconda and Kennecott units, Nos. 1 and 2, to make a market at 10 1/4-c-.
Catching the price a cent below what they last paid, the auto companies came in. Copper sales picked up; in a few days twice as much was sold as in the month of March, copper finishing mills kept running at 50% to 60% of capacity. Loss to corper companies on the cut: $1,200,000. Saving to auto manufacturers: nearly 60 per unit & parts (mostly radiators).
*Although next autumn's annual Auto Show-has already been moved forward a month, to October, to motor makers all-summer shut downs seem unavoidable and they are tempted to beat the gun on each other by putting 1940 models on the streets as early as July. This would not be good news to industry's toolmakers, for such premature previews would pay dividends to manufacturers who spent least time (and money) on getting new machinery for the new models.
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