Key to the new price adjustment policy is the selection of the New York Mercantile Exchange Average Spot Month Settlement Price for COMEX Division Aluminum futures as the official pricing indicator for purchases of primary aluminum based parts in North America. For such purchases outside North America, General Motors will use the London Metal Exchange High Grade (LME HG) Cash Settlement Price Monthly average.
"This new pricing policy is an initial step in reaching compliance on our commodity purchases under the new FASB 133 regulations," said Dan Bealko, Global Commodity Manager, Lightweight Metals for General Motors during a morning media briefing at The Exchange's New York headquarters. "More importantly, it establishes a common, consistent global policy that will more accurately reflect the availability and price of aluminum wherever GM purchases aluminum parts."
"We are delighted that General Motors has decided to reference our future prices for their North American purchases," said R. Patrick Thompson, president, New York Mercantile Exchange. "When we launched this contract in May 1999, one of its key purposes was to provide sorely lacking price discovery to the North American aluminum market. Today's announcement demonstrates that our contract has taken major steps forward in fulfilling this key industry service."
GM's new pricing policy also indicates the price adjustment indicators it will use for secondary aluminum-based parts worldwide. They are: the Platt's Metals Week Monthly Average Price for Secondary Aluminum Alloys MW A-380, MW 319, MW 356, MW F-132 or the London Metals Exchange Alloy Cash Settlement Price Monthly Average, as appropriate. The Platt's Metals Week secondary aluminum alloy prices have been in use by General Motors since 1993 and are well respected throughout the industry for their reliability and accuracy.
Wherever price indicators are being changed or eliminated, a one-time adjustment of the pricing differential between the old and new price indicators will be added to the value-added portion of the total aluminum part price.
"There should be no change in the total price paid to GM's aluminum parts suppliers upon implementation of this policy in July," said Bealko.
General Motors (NYSE: GM), the world's largest vehicle manufacturer, designs, builds and markets cars and trucks worldwide. In 1999, GM earned $5.6 billion on sales of $176.6 billion. It employs about 388,000 people globally.
GM is investing aggressively in high technology and e-business within its global automotive operations and through such initiatives as e-GM, GM BuyPower, OnStar and its Hughes Electronics Corp. (NYSE: GMH) subsidiary.
GM also operates one of the world's largest and most successful financial institutions, GMAC. More information about General Motors can be found at www.gm.com.
