• A PENNY FOR YOUR THOUGHTS?

  • Never underestimate the dedication and value of your people. I prefer to interact with the people that work for us as peers. This keeps the playing field level and opens up the communication channel to the best everyone has to offer. Although some may snicker at this, I really can be wrong. Therefore, internal communication puts the checks and balances in place before any new products leave R&D and are introduced into the market. I am extremely grateful to have such a dedication in my staff, especially when you consider that they realize that their success depends on the company’s success. The reason that I am writing this is to highlight a recent problem that we have had to confront concerning product price increases. I am not alone in this club. All manufacturers have been affected by this situation as the cost of raw materials has taken a steep increase. We must now think globally and must consider the global pressure for raw materials in our marketing plans. All this comes down to an excellent piece of research that Theresa Antell of my marketing staff shared with our dealers to try to realistically explain the reason for our recent price increases. It was her attempt to educate our dealers and retail customers of the situation versus expecting them to blindly accept the increases.

  • When you can’t buy a penny for a penny anymore, it becomes glaringly obvious that the cost of copper has risen. So, how do you reduce the manufacturing costs of manufacturing pennies? Well, you replace copper with a less expensive material: zinc. That’s exactly what happened in 1982 when the main ingredients in pennies were altered from 95% copper, 5% zinc to 97.6% zinc and 2.4% copper plating. That allowed the cost of a penny to remain less than it’s worth.

In a perfect world, substitutions of expensive materials could be replaced with less-expensive ones to remedy the cost of anything that rises. However, in terms of wiring, we don’t have that option.

  • There are certain characteristics of copper that make it the perfect metal for electrical wiring. Copper is the standard benchmark for electrical connectivity and is the best conductor of electricity, second only to silver. It packs more conductive power into a given diameter than any other substituted material. Copper bends easily and yet remains strong with each bend and resists corrosion. Copper also has an extraordinary high melting point, which allows for heavy overloads and surges without posing a risk of damage to its surroundings. Copper is generally refined to a 99.98% purity factor (more pure than Ivory Soap!) making it a consistently high-quality material for electrical use.

Because of the attractive qualities of copper, it has become a hot commodity in markets other than automotive. The Copper Development Association has credited the construction and building boom of recent years with the high demand for copper. The expansion of the construction and building markets have begun to dip into the copper pool by using upwards of 1,311 million pounds of copper each year. That number is expected to rise as new construction uses for copper are tried and tested. Half the copper in the United States goes to construction and building.

  • China is another factor in the demand for copper. China has undergone an enormous building craze in the last decade, which has resulted in high demand for many products and their willingness to pay top dollar for them.  And that includes quality metals. China is also manufacturing more electrical products/accessories that any other country. At least 20% of their copper consumption is used in electrical products such as telephones, stereos, televisions and earphones.

The global consumption of copper has risen from 14 million tons to 20 million tons in the last nine years. With the continual rise in use, coupled with the continual demand for copper, it is obvious that cost for this most sought after material will steadily rise as well.

  • Due to the volatile price of copper and the additional usage by international markets, manufacturers who use copper regularly are expected to qualify the rising costs of manufactured goods.

In an attempt to offset some of the rising costs, ambitious recycling efforts have been introduced regarding wiring harnesses. The recycling process is a series of complicated and detailed events to separate the non-metallic insulation parts of the harness from the copper conductor materials. Because it has significant commercial value, recycling copper for additional uses in wiring will someday be the norm. But until that time, copper’s price will continue to steadily increase. Currently, experiments regarding time and temperature are being conducted to determine the optimum conditions to salvage the highest amount of re-useable copper.

  • The average cost of a full vehicle wiring harness is $1,000 and it weighs approximately 44 pounds. Forty-five percent of the harness is copper. With those figures it is easily understandable that a recycling program would benefit consumers.

  • On average, 507 million pounds of copper are used in the automotive electrical market each year. With the automotive enthusiast groups growing at the rate they are, additional buyers and consumers are infiltrating the market creating additional demands for wiring products.

  • Because manufacturers are forced to pay more for copper, they face the challenge of restructuring their manufacturing processes to absorb the higher costs without having to pass along the increases to the consumers. There becomes a point, however, when prices must rise and processes must advance. This is the state of the industry today.

  • So, as you realize price increases in products involving copper, keep in mind that this is a global phenomenon and the ripple of higher costs of copper are being felt worldwide.

  • The next time you offer someone a “penny for their thoughts,” remember that it just might cost you more than you expect.

The bottom line is that there is a lot of great work done by a lot of great people within our industry. Most of this work centers around our personal and professional goals to produce a quality product. I think about this every time I am the customer.  

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