GM Closely Watched by Stillwater Mining

By Beacon Staff

BILLINGS – An official at Stillwater Mining Co., which sells platinum and palladium for catalytic converters in automobiles, says the company is closely monitoring General Motors’ bankruptcy to see if Stillwater contracts with the auto giant will be honored.

All the palladium and 70 percent of the platinum produced by the company’s mines near Nye, in south-central Montana, is committed to filling contracts with GM and Ford, Stillwater spokesman John Beaudry said Monday.

With GM facing a sweeping reorganization as part of a government-sponsored rescue, Beaudry said Stillwater could be hurt if that contract is modified as the automaker works through U.S. Bankruptcy Court.

“In the best case scenario, the contract is honored and we move forward and GM emerges from the bankruptcy as a stronger company. In the worst case, they could ask to revisit the terms of the supply contract,” Beaudry said.

Stillwater, which has offices in Columbus west of Billings, warned in a May 6 financial filing with the Securities and Exchange Commission that “a bankruptcy filing by General Motors Corporation may have widespread consequences.”

Prices set in Stillwater’s automaker contracts require GM and Ford to continue paying a set amount for platinum and palladium even when market prices drop lower. At recent palladium market prices, that provision was shielding the company from the equivalent of $57 million in lost annual sales, according to its SEC filing.

Beaudry declined to detail the value of the GM contract.

But Steve Gentry, a spokesman for the miners’ union, United Steel Workers Local 11-0001, said the GM contract was the less valuable of its two auto company agreements.

“I haven’t heard anything that would concern me at least up until this point,” Gentry said. “Their major contract is not with GM; it’s with Ford and Ford hasn’t gotten into all this.”

Stillwater last month reported a first-quarter loss of $11.6 million, on revenues of $85.8 million. That’s down from a 2008 first-quarter profit of $2.8 million, on revenues of $186.4 million.

Late last year, as part of a reorganization spurred by falling commodity prices, Stillwater trimmed its work force by 16 percent to 1,336 employees, according to the SEC filing.

Beaudry said the mining operation was made leaner in part because of rising concern over the auto industry contracts — a move he suggested could help the company weather any tough times to come.

“The production targets and the goals set in our reorganization plan — so far in 2009 we’re meeting or exceeding those targets,” he said.

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