With General Motors planning to close five plants in 2019, a local manufacturer might see some financial effect in the long run.
Granite City Works produces alloys for specialty wheels for General Motors vehicles, said Dan Simmons, the president of the United Steel Workers Local 1899 in Granite City.
GM announced it plans to end production at five plants, including one in Canada and two in Michigan, one in Ohio and one in Maryland.
Simmons said GM’s closures should not have an immediate effect on Granite City because the plant has plenty of business with other steel products, including pipe and tube customers, and crane and appliances businesses. The market for those products has picked up, Simmons said.
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“We’ve got a lot of customers,” Simmons said. “We’re kind of diversified in a lot of different markets.”
But other U.S. Steel plants that make steel used for truck beds, hoods, undercarriages, body frames and side panels of vehicles, could be affected by the closures, Simmons said.
U.S. Steel could decide to move production lines around if Granite City’s sister plants start suffering. That could have an effect on Granite City Works’ operations, Simmons said, but no one could predict exactly what that impact could be.
Economic ripple effect
Anytime a major manufacturer shuts down, the closure impacts suppliers down the line, says Tim Sullivan, instructor in the Department of Economics at Southern Illinois University Edwardsville. Sullivan is also director of the Office of Regional Economic Analysis.
“Every facility like a GM plant is going to be buying things from suppliers, whether it’s parts, or they hire workers,” Sullivan said. “When they shut down, that means their suppliers then lose part of their sales, which means they lay off part of their workforce. That does ripple through the economy.”
How much an effect a closure has on a supplier depends on how close the supplier and buyer are geographically and economically, Sullivan said. Suppliers are much more spread out and diverse in what they produce than in the past, Sullivan said.
“They might be buying parts from other side of the country, or the other side of the world,” Sullivan said. “On one hand you have multiple layers of protection if the car plant shuts down. On the other hand it does mean it’s more spread out and less concentrated that if a plant shuts down in Ottawa, it could affect not only a supplier but a supplier’s supplier.”
U.S. Steel plants up north near Detroit or Canada would be more heavily impacted than Granite City Works, said Jason Fernandez, a trustee with the union.
Do tariffs affect car sales?
Granite City Works fired up its blast furnaces again after President Donald Trump’s administration implemented a 25 percent tariff on foreign steel.
Earlier in 2018, GM lowered its profit forecasts for the year citing higher steel and aluminum prices. The auto-manufacturer even warned of job losses and lower wages because of tariffs, according to Business Insider.
The union president says he does not believe declining car sales are directly connected to the tariffs.
“At the full 25 percent if applied to a $35,000 vehicle, (the full extent of the tariff) would only equate to a $200 cost increase,” Simmons said. “But if you’re mass producing that many vehicles, a couple hundred dollars comes out to a $1 billion loss as opposed to before, I guess those numbers could support that.”
“It’s not going to stop me from buying a $35,000 vehicle if that’s what I’m in the market for, and knowing I’m getting American steel, made in the United States,” Simmons added.