By Jeffrey Sparshott
The U.S. Mint is considering a change to the mix of metals it uses to make quarters, dimes and nickels, a study Congress mandated in 2010 to examine ways to save money. If the materials are altered for the first time in half a century or more, some coins could have new colors and weigh less.
The Mint, which turns a profit on the dime, quarter, half-dollar and dollar, has driven manufacturing costs lower in recent years. But it now costs 1.8 cents to make a penny and 9.4 cents to make a nickel, costing the federal government about $104.5 million last year.
The U.S. Mint has tested coppertoned 'nonsense' nickels that share the look of the penny. Jeffrey Sparshott/The Wall Street Journal
The Mint has concluded it can't wring meaningful cost savings out of the penny, last changed in 1983. But officials are optimistic they can make other legal tender, especially the nickel, at less expense.
The push has riled vending-machine operators, arcades and other coin-reliant industries worried about different weights and metal contents, which could force them to revise or replace the mechanisms they use to accept coins.
"It's foolish. It's going to hurt so many people" if the Mint makes major changes, said John Schultz, executive vice president of the American Amusement Machine Association, a trade group representing operators of jukeboxes, pool tables, videogames and other coin-operated entertainment.
The Mint is mindful of potential industry costs and is working with companies that supply metals and rely on coins. At a minimum, it plans to keep the diameter and thickness of any potential new coins the same as existing specie, two key variables for coin mechanisms.
It has spent $8.1 million over three years to develop a research-and-development facility and study different materials. It plans to have a final recommendation on coin content by the end of this year, said Richard Peterson, the top official at the agency. Congress has the final say.
To test the viability of six different alloys under consideration, the Mint inside its lab here is making millions of what it calls "nonsense" pieces. The lab recently was minting about 2 million test nickels made of copper-plated zinc in one of its stamping machines.
The pieces, with a profile of Martha Washington on the front, remain the same size and shape as current nickels, but weigh in at 4.06 grams, a little less than the current coin's 5 grams, and are the same brownish color as a penny.
The Mint has no plans to circulate a Martha Washington nickel. Only about 1,000 of the copper-zinc pieces were retained for additional research that mimics the wear and tear of steady handling. That includes exposure to artificial perspiration and extreme humidity. Coins are designed to hold up for about 30 years.
The Mint also is weighing public perception, ease of production, durability and costs to industries that might have to alter coin-reading machinery. "If we do offer a new nickel, how is the public going to respond to perhaps a brown nickel?" Mr. Peterson asked.
As for the penny, Mr. Peterson said stopping production is a "discussion topic." Canada, the U.K. and other nations have stopped production of their smallest-denomination coin. While some economists and other groups see the penny as a waste, Mr. Peterson says demand for the one-cent piece remains high. The Federal Reserve—the Mint's key customer—ordered 6.6 billion last year, more than all other coins combined.
Industry groups are particularly wary of tweaks to U.S. coinage, which could force companies to update the equipment they use to accept change. Machinery is now calibrated for a nickel that has been 75% copper and 25% nickel since 1866, except for a brief stint during World War II. Dimes and quarters have been made out of the same nickel-copper sandwich since 1965.
Conversion costs across an array of sectors, including vending machines, videogames, laundromats, pay phones and parking meters, could reach as high as $1 billion if, for example, new quarters were to maintain the same dimensions but have a significantly different composition, a 2012 study for the Mint found. That's because some machines zap coins with electricity to read an electromagnetic signature that is unique to different metals.
Vending-machine operators say they would be squeezed by upgrade costs. "We work in an industry that has very low profit margins, it is very difficult to raise our prices and compete with other channels" such as convenience stores, said Eric Dell, senior vice president of government affairs at the National Automatic Merchandising Association, a trade group.
The National Automatic Merchandising Association estimates the U.S. has about 5 million food and beverage machines. Depending on the scope of currency changes, coin mechanisms would have to be updated, costing $100 to $200 each, or replaced for anywhere from $250 to $475 each, Mr. Dell said.
The Mint's Mr. Peterson said any recommendation would likely include maintaining the metallic properties of dimes and quarters, helping any new coins to circulate seamlessly with existing ones. The savings would be less for taxpayers, but easier on industry and less noticeable to the public.
"On the dimes and quarters, they are really the workhorses of the coin lineup right now," Mr. Peterson said.
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