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Johnson Controls sues suppliers over steel price surcharges

By Tom Stundza -- Purchasing, 7/17/2008

Johnson Controls is suing four suppliers that want to raise prices to compensate for the rising cost of steel. The companies must absorb higher raw material costs because their purchasing contracts require them to do so, according to lawsuits filed by Johnson Controls with the U.S. District Court for the Eastern District of Michigan in Detroit.

The defendants named in the lawsuits are Tecnicas De Fluidos of Puebla, Mexico; Steel Technologies of Louisville, Ky.; Windsor Machine & Stamping of Windsor, Ontario, and Illinois Tool Works, Glenview, Ill. The companies produce stampings and other components. The Associated Press says a federal judge in May issued a temporary restraining order preventing Tecnicas De Fluidos, which makes machined tubes, from raising prices or halting shipments.

Wire service reports say neither Johnson Controls of Milwaukee nor its suppliers would comment. However, there has been plentiful market feedback of irritation and resentment being expressed to steel suppliers from automakers and auto parts suppliers about recent mill attempts to add $250/ton surcharges atop contract prices to offset the rising raw materials and energy costs that have boosted steel spot prices by 93% since December.

Automotive News reports Johnson Controls already has received an e-mail message dated from Windsor Machine salesman warning that the Canadian company “is faced with a business-threatening situation.” Because of that, Windsor Machine has had no other option but to stop ordering steel for Johnson Control-ordered products which soon will end shipments to the maker of automotive seating and interior systems.

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