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GM Purchasing Chief: Raw Material Prices 'Scary'

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GM Purchasing Chief: Raw Material Prices 'Scary'

October 01, 2007: 05:55 PM EST

The purchasing chief of General Motors Corp. (GM) said that price increases on certain key commodities are "scary" and that the auto maker is looking to reduce consumption and find alternate materials in some cases.

In a press conference this past weekend in Bogota, Colombia, GM global purchasing chief Bo Andersson said the auto maker would look to use more magnesium instead of aluminum and more plastic in place of steel.

The auto maker, like its competitors, is looking to cut costs. But price inflation in key commodities makes that task more challenging for the industry.

"The most scary thing for me is the development on raw materials," Andersson said.

He noted that prices for aluminum, steel, copper and zinc in particular are up.

"The first thing is to reduce consumption and the second thing is to find alternatives," he said. "Use less aluminum and more magnesium and less steel and more plastic."

Andersson said GM needs to work with its supply base to try to offset the effects of higher raw material prices.

"Easy to say, harder to do," he said.

GM's annual purchasing budget is about $89 billion globally, with about $60 billion coming from North America.

In recent late trading GM shares recently fell to $35.99 from the Monday close of $36.06.

-By Terry Kosdrosky, Dow Jones Newswires; 248-204-5532; terry.kosdrosky@ dowjones.com

(Inti Landauro contributed to this report.)

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He noted that prices for aluminum, steel, copper and zinc in particular are up.

"The first thing is to reduce consumption and the second thing is to find alternatives," he said. "Use less aluminum and more magnesium and less steel and more plastic."

Andersson said GM needs to work with its supply base to try to offset the effects of higher raw material prices.

"Easy to say, harder to do," he said.

What about having a hedging strategy in derivatives markets?

Edited by ZL-1
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the way the text is written it appears the sky's falling on their heads, hence my comment...

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