MHT to reject “cost down” contracts

Marmon Highway Technologies (MHT), which owns 11 companies that supply components to truck and trailer manufacturers, including Fontaine, Webb Wheel, TSE Brakes, and Hogebuilt, said it will no longer sign multi-year supply agreements with customers that call for annual mandatory price reductions or “cost downs” that prevent full recovery of unavoidable cost increases

Marmon Highway Technologies (MHT), which owns 11 companies that supply components to truck and trailer manufacturers, including Fontaine, Webb Wheel, TSE Brakes, and Hogebuilt, said it will no longer sign multi-year supply agreements with customers that call for annual mandatory price reductions or “cost downs” that prevent full recovery of unavoidable cost increases.

“We must maintain reasonable margins in order to continue to develop innovative, high-quality products for the trucking industry,” said MHT President Kelly Dier in a press statement.

“Unfortunately, a number of the predictions that some of us made in early 2009 regarding political instability, global sourcing, logistics costs and diesel fuel prices have come to pass,” he added. “In addition, currency valuations and [increased] demand – particularly in China – exacerbate the problem. These significant shifts are fundamentally affecting the way we do business. Thus the ability to continually curtail costs by chasing lower-cost labor around the globe is fading fast.”

MHT’s companies engineer, manufacture and supply a broad range of products to the trucking industry, including brake systems, platform trailers, fifth wheels, leaf springs, spray suppression equipment, specialty drive axles, and others. Agreeing to price reductions on these products to OEMs in the face of rising costs simply is no longer feasible, said Dier.

“Our businesses are not immune to the rapid escalation of energy costs and commodity prices,” he pointed out. “Inflation fears in operating costs are becoming an everyday reality, and we have to recover unavoidable cost increases. To do otherwise would not only weaken our businesses, but also would ultimately undermine the level of research and development, innovation, quality and reliability that our customers absolutely expect.”

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