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Auto suppliers are raising prices for Ford — and beyond

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DETROIT, Sept 21 (Reuters) – Auto industry suppliers are raising prices for their customers across the board, not just Ford Motor Co ( FN ), which it warned this week is taking on $1 billion in inflationary costs.

Several suppliers said Ford is not alone in suffering, as automakers across the board are increasingly burdened by energy, labor and raw material costs faced by suppliers. Suppliers contacted by Reuters said they had raised parts prices in the 7% to 20% range.

“Over the course of this year, more and more suppliers have gone to their customers,” said Andreas Weller, chief executive of aluminum parts maker Aludyne, citing higher price demand from automakers.

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“They’re trying to hold everyone back, but eventually the dam breaks and then you have to pay people,” he said of the automakers.

Weller said that in Europe alone, natural gas and electricity prices have increased nearly 10-fold thanks to Russia’s invasion of Ukraine two years ago, and those prices in the United States have increased five-fold. Throw in a tight labor market and more compensation needed to attract workers, and “there’s no improvement in sight.”

That pressure was reflected in Ford’s warning on Monday that inflation-driven supplier costs were $1 billion higher than expected in the current quarter. Fears of rising costs sent shares of the Dearborn, Michigan automaker to their deepest one-day drop in a decade on Tuesday. Read more

Ford’s warning hit not only automakers such as General Motors Co ( GM.N ) and Stellantis ( STLA.MI ) but also other stocks more broadly. Read more

Bob Roth, co-owner of Roman Manufacturing, a producer of transformers and glass-molding equipment in Grand Rapids, Michigan, said his company is the only place that has seen cost relief recently with lower copper prices.

“We’re not going to put it back until our arms are really twisted,” he said of the company’s price hike. In fact, the rapidly-changing pricing environment has led RoMan to change requirements so that customers have only 15 days to lock in a contract price compared to the 90 days previously offered.

Vitesco Technologies CEO Andreas Wolff said during the Detroit Auto Show last week that the maker of engine control units and electric vehicle charging hardware is driving up the cost of its materials to automakers.

“It’s clear that (automakers) have an opportunity to increase the prices of new cars, we’ve increased on the things side, (and) in many cases we’ve been able to pass that increase on to our customers,” he said.

At the same time, Wolff said, Vitesco has teams assigned to watch suppliers in its own network that may face financial problems due to rising costs.

Many suppliers can’t move fast enough, offering trailing contracts that force them to squeeze costs and receive smaller dividends when prices rise.

“It’s going to be hard to get ahead of it,” said Bill Berry, owner of Die-Tech & Engineering. “The cost of our raw materials has skyrocketed from a historical perspective.”

Berry has raised some prices, but is sensitive to overseas competition.

Automakers have been facing supply chain issues for the past two years, including semiconductor chip shortages that have repeatedly delayed vehicle production.

“Ford’s announcement shows we’re not out of the woods yet,” Morgan Stanley analyst Adam Jonas said in a note. “It was only a matter of time before supplier cost recoveries started flowing in.”

According to suppliers, things won’t change anytime soon.

“This is a new economic reality and we will continue to fight for (financial) relief,” said Joe Perkins, CEO of Michigan engineering and machinery firm Mobex Global.

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Reporting by Ben Clayman and Joseph White in Detroit Editing by Nick Ziminski

Our criteria: Thomson Reuters Trust Principles.

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