With its use of aluminum set to grow when two high volume engine programs begin production (see Ward's Automotive Reports — March 1, '99, p.3),Corp. last week signed a 13-year contract to buy more than $1 billion of recycled aluminum.
The automaker confirms the reclaimed alloy will be used in a variety of engines as well as other vehicle components. GM predicts aluminum content in its vehicles will rise 7% or more a year for the foreseeable future. The deal with IMCO Recycling Inc. is the latest of several material procurement pacts negotiated by GM aimed at attaining steady commodity prices.
IMCO will process nearly 2 billion lbs. of aluminum during the length of the contract from a new $22 million facility it plans to build close to GM's Saginaw, MI, metal casting operations. Also, GM currently is building a powertrain factory in nearby Flint that sources say will produce a forthcoming all-aluminum engine for GM's compact pickups and midsize sport/utility vehicles. The IMCO plant will have an annual capacity of 200 million lbs. and will open in mid 2000. Until then, the Irving, TX-based company will supply aluminum to GM from another plant in Michigan, as well as from Tennessee.
In addition to eliminating market fluctuations, the proximity of the facilities is a key to cost reduction because most of the aluminum will be transported as molten metal in customized trucks on a just-in-time basis from IMCO's facility to GM's Saginaw operations. “I'd say that the number one cost savings is that you don't have to heat (the aluminum) back up again,” says John Stiles, executive director of GM Worldwide Purchasing-Metallic.
The automaker says the IMCO deal doesn't displace other aluminum suppliers. “This is for growth,” says Kevin Moore, GM's manager of commodities for secondary aluminum.
As with the recently announced steel contracts, GM's aluminum purchase includes resale to its partsmakers.
GM contends it has no plans for another secondary aluminum deal. The automaker says that about 65% of the aluminum used in vehicles is recycled. According to Mr. Stiles, the IMCO contract will not have a downward effect on a primary aluminum pact GM signed in the fall with Alcan Aluminum Ltd. “There's plenty of mouths to feed with the 1.7 billion lbs. of metal we use on an annual basis,” Mr. Stiles says.