United Technologies (NYSE:UTX) | Materials & Supply

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Key Raw Materials and Components + Supply

United Technologies currently has adequate sources for its purchases of materials, components, services and supplies. The company works continuously with its supply base to ensure an adequate source of supply and to reduce costs. United Technologies pursues cost reductions through a number of mechanisms, including consolidating its purchases, reducing the number of suppliers, strategic global sourcing and using bidding competitions among potential suppliers. In some instances, the company depends upon a single source of supply or participate in commodity markets that may be subject to allocations of limited supplies by suppliers.

Like other users in the United States, the company is largely dependent upon foreign sources for certain raw materials requirements such as cobalt (Finland, Norway, Russia and Canada), tantalum (Australia and Canada), chromium (South Africa, Kazakhstan, Zimbabwe and Russia) and rhenium (Chile, Kazakhstan and Germany). United Technologies has a number of ongoing programs to manage this dependence and the accompanying risk, including long-term agreements and the conservation of materials through scrap reclamation and new manufacturing processes. Other key materials that UTC needs are aluminum and titanium.

According to United Technologies, its supply management practices are based on an appropriate balancing of the foreseeable risks and the costs of alternative practices. Although recent high prices for some raw materials important to some of the company's businesses (for example, steel, copper, aluminum, titanium and nickel) have caused margin and cost pressures, United Technologies does not foresee near term unavailability of materials, components or supplies.

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