Cutting costs has become a way of life at Aggressive Engineering Corp., a Southern California metal stamping company.
Over the last decade, President Dan Bridges has slashed his workforce from 52 to 25, capped wages and retooled the assembly line to increase its output of metal parts.
But Bridges said he might have to close his doors if the U.S. government doesn't lift the duties imposed in 1993 on foreign firms accused of dumping cheap steel in the U.S. market.
Those duties, he said, have contributed to a doubling in the price of galvanized steel, which accounts for 70% of his company's costs.
"Even if we made ourselves 100% more efficient, it wouldn't offset the increase in costs we've seen due to the dumping charges," said Bridges, 42, whose father started the Anaheim company in 1968.
Under U.S. trade law, it is illegal for foreign firms to sell products at below the cost of production, a practice known as dumping. In those cases, the U.S. government can impose punitive duties that raise the prices of those products.
But critics say anti-dumping laws hurt the U.S. economy because they raise prices for American consumers and over-protect high-cost industries from legitimate foreign competition.
As evidence of the high stakes in this trade battle, U.S. and foreign automakers have joined other U.S. steel consumers to persuade the U.S. International Trade Commission to revoke the duties when it meets in mid-December.
The duties range from 1.6% to 40% of the product's cost, depending on the product and country of origin.
But U.S. steelmakers want the duties kept in place until the next review, which is scheduled for 2011.
The dispute pits two heavily unionized industries -- steel and cars -- against each other, at a time when trade issues figure prominently in several tight races in next week's mid-term elections.
Cash-strapped automakers, parts makers and other steel consumers say the U.S. steel industry is crying wolf, asking for protection from imports as it jacks up prices and posts hefty profits.
Steel is a major expense for U.S. automakers, which are slashing jobs and benefits to compete with lower-cost foreign manufacturers. In a sign of the U.S. auto industry's worsening troubles, Ford Motor Co. said last week that it would post a third-quarter loss of $5.8 billion, its largest loss in 14 years.
General Motors Corp., Ford, DaimlerChrysler, Honda Motor Co., Nissan Motor Co. and Toyota Motor Corp. spend $200 billion a year on materials, parts and services for their U.S. operations. New United Motor Manufacturing Inc., a joint venture between GM and Toyota, uses 1 million pounds of steel a day at its Fremont, Calif., truck-making plant.
"The U.S. steel industry no longer needs this protection," said Mustafa Mohatarem, chief economist for GM.
Much has changed since anti-dumping penalties were imposed on steel coming from Japan, South Korea, Canada, Australia, France and Germany. Back then, it was U.S. steel companies that were struggling to survive the deluge of low-cost imported steel. Thirty-five firms went into bankruptcy and more than 40,000 jobs were lost.
The 1997 Asian financial crisis forced the global steel industry into another round of consolidation and restructuring.
After shifting much of their multibillion-dollar pension liabilities to the government, the remaining U.S. producers have emerged leaner and more competitive. U.S. Steel Corp., Arcelor Mittal and Nucor Corp. control 70% of the U.S. production of flat-rolled steel.
Demand from fast-growing China and India has driven up prices, leading to large profits for steelmakers. The price of galvanized steel from the six countries targeted with dumping penalties jumped from $496 a ton in 2001 to $729 a ton last June, according to the trade commission.
But U.S. steelmakers claim their good fortune could easily turn sour. They say the addition of capacity in China and India could lead to another steel glut and price-slashing if the global economy hits a rough patch. The commission is expected to make its ruling in mid-December.
Bob Johns, director of government affairs for Nucor, said the anti-dumping laws were the "last line of defense" for U.S. steelmakers threatened by Chinese manufacturers benefiting from an undervalued currency and government subsidies.
"We run a serious risk of having a problem down the road in those products and it will come sooner rather than later in our view," he said.
But Jim Harbour, a Troy, Mich., automotive consultant, said Chinese and Indian steelmakers have their hands full serving their domestic markets, which is why he doesn't foresee a collapse in steel prices.
He estimated that steel prices would be closer to $450 a ton without the punitive duties and that the higher prices were costing U.S. carmakers $250 to $300 per vehicle, which adds up to an extra $5 billion to $6 billion a year across the industry.