General Motors, Alcan Roll Out Aluminum Pact

General Motors Corp. awarded Alcan Aluminium Ltd. a 10-year, multibillion-dollar supply contract for aluminum, an important ingredient in auto makers’ efforts to limit pollution by making vehicles lighter.

The world’s largest auto maker now uses about 1.7 billion pounds of aluminum annually--an average of 210 pounds per vehicle--making it one of the metal’s biggest consumers worldwide. GM expects the per-vehicle average to rise by at least 7% a year.

Auto makers have long been expected to use more aluminum, provided they could get a steady supply at a reasonable price. Earlier efforts stalled when questions arose about who would assume the risk of the metal’s price, which can vary by as much as 40% a year. The GM pact ties the price to Alcan’s production costs, rather than to world commodity prices.

“This is a precedent-setting contract,” said Vahid Fathi, a metals analyst at ABN Amro Chicago Corp. The pattern is likely to also be adopted by the aluminum industries’ other big customers, Fathi said.

GM gained leverage to win a 10-year contract because of aluminum’s price, which has fallen 20% in the last year on concern that the recession in Asia is cutting regional demand. Aluminum for three-month delivery, which last traded at $1,316 a ton on the London Metal Exchange, fell to a four-year low of $1,284 a ton last month.

GM will buy about a quarter of its expected future aluminum requirements directly from Alcan--about 10% of Alcan’s production.

Shares of Detroit-based GM fell 56 cents to close at $66 on the New York Stock Exchange; shares of Montreal-based Alcan rose 88 cents to close at $28.19, also on the NYSE.