Bosch hit by steep raw material price increases

Cost of metals such as copper and aluminium means engineers are looking at using other materials

German industrial giant Bosch is being impacted by a ‘worrying’ level of raw material price increases, it has admitted.

Surging prices of metals such as copper and aluminium have increased its purchasing costs by hundreds of millions of Euros a year. “Raw material prices are worrying us,” said Dr Rudolf Colm, the Bosch board member with responsibility for purchasing and logistics. “Copper and aluminium prices have already reached peak levels seen before the economic crisis in 2008.”

Colm said that, despite hedging against price rises, it was inevitable that some of the increased costs would have to be passed on to the market. He said that Bosch’s engineers were focused on reducing expensive raw material content through the use of alternatives materials.

Bosch has also been affected by the earthquake and tsunami in Japan. The earthquake and its consequences did not claim any victims among the nearly 3,800 employees it has in the country. And physical damage to its 36 locations in Japan was limited.

But Bernd Bohr chairman of Bosch’s automotive group, said that the closure of some Japanese suppliers had meant that there was a shortage of semiconductors and that supply chain problems were likely to extend into the second half of the year. “We have been looking at alternative semiconductor sites. Inevitably there will be problems,” he said.

Bohr said that parts shortages from Japan meant that carmakers might be forced to assemble vehicles, and then add in some electronic modules at a later stage. However, he said that he did not think that events in Japan would disrupt supply chains in the longer term.

These difficulties notwithstanding, Bosch said that it had made a good start to 2011. It said that sales for the full year were expected to pass the €50 billion mark for the first time, with a return on sales of between 7 and 8%. The company is looking to recruit 15,000 additional staff this year, taking its total workforce to more than 300,000. More than half of these new jobs will be created in the Asia Pacific region, 5,900 of them in China