||Automakers Remain Optimistic Despite Economic Turbulence
Somebody forgot to tell the auto industry that the economy is lousy.
Indicators are glum. The fallout from the federal budget crisis is unclear. The stock market tanked last week and commentators have resurrected the term "double-dip recession." Mortgage defaults, unemployment and low consumer spending have economists fretting.
But the auto industry sees things differently.
"We're hiring," proclaims Michael Heneka, president of seating and emissions system supplier Faurecia North America. "We're running 24/7 at all of our North American plants. You'd never know there was any concern out there. I know there is, but we have to keep moving forward."
Heneka will add about 500 people to his North American manufacturing staff of 10,000 by year end.
He recently opened a plant in Louisville, Ky., to supply interior parts to Ford Motor Co. and moved into a plant his company acquired in Lansing, Mich., to triple Faurecia's capacity for General Motors' Cadillac CTS program.
Nissan North America, his newest customer, is adding three models to its U.S. production lineup, and Heneka is angling for a piece of that business.
That's on top of a year when light-vehicle sales are up 11 percent through July, despite severe supply shortages caused by the earthquake in Japan.
"People want cars"
Industry executives at last week's annual Management Briefing Seminars in Michigan were still painfully aware of the scars suffered during the industry collapse of 2008 and 2009. But the mood wasn't that of survivors peeking nervously out of a bunker.
Instead, they spoke of a supply chain jockeying for new customer orders, and of automakers bent on goosing vehicle output to go after customers they believe are eager to buy.
"There is a lot of pent-up demand out there," says Ray Tanguay, Toyota Motor Corp.'s chief North American manufacturing executive. "People want cars, and we haven't been able to give them to them."
Toyota, choked since March by the Japanese earthquake and global supply-chain shutdown, will begin running all North American assembly plants at 110 percent of straight-time two-shift capacity in September, Tanguay told Automotive News last week. He said the surge could go on throughout autumn as Toyota rebuilds inventories.
Volkswagen Group of America is making plans to expand capacity for its just-launched Passat sedan in Chattanooga. Don Jackson, president of manufacturing at the $1 billion plant, said the company has drawn up plans to take the new factory from a current capacity of 150,000 Passats a year to 200,000 or 220,000 if demand warrants. The new Passat's smaller and more expensive German predecessor had sales under 13,000 last year.
"We're not too concerned with the short-term outlook," said a confident Jeff Klei, president for North America at chassis, powertrain and interiors supplier Continental AG. He declined to give specific figures but said Continental is adding staff at different operations, especially in powertrain.
"Not slowing down"
"We just need to remember what we went through and be careful we don't overbuild," he said. "But we're not slowing down."
Neither is German transmission supplier ZF Friedrichshafen AG, which next month will open a plant in Florence, Ky., to supply electronic steering systems to GM. Four months later, ZF will open a $350 million plant in Greenville, S.C., to supply a new generation of eight- and nine-speed transmissions to Chrysler.
Two summers ago, Chrysler and GM were in bankruptcy, and many North American suppliers feared for their own fates.
"People have asked me how many North American suppliers were in distress during the worst of it," muses Bill Diehl, CEO of BBK Ltd., a suburban Detroit consulting firm. "The answer is almost all of them. Everybody was in jeopardy."
The summer of 2011 is a different picture, he says. BBK has launched a subsidiary called Performance Improvement to help auto suppliers handle the surging demand.
"The big issue is no longer suppliers in distress," he says. "It's the capability of suppliers to meet the demands of expanding capacity and bigger customer orders."
The reality test is U.S. vehicle sales. Despite poor economic signals, volumes continue to edge up.
1 million more
Market researcher IHS Automotive is holding to its 2011 forecast of 12.7 million U.S. light-vehicle sales, which would be up more than 1 million from 2010.
Others are even more optimistic.
Chrysler Group is forecasting industry sales this year at the lower end of 13.0 million to 13.5 million units, and its own sales at 2 million, says Dan Knott, Chrysler's purchasing chief. That would be almost double Chrysler's 2010 sales of 1.1 million. Through July, Chrysler sales rose 21 percent.
"We hit our number last year, and we're going to hit our number this year," Knott said. "I don't think we were smoking dope when we put (our projection) together. We are basing it on solid fundamentals."
(Source: Automotive News, 08/08/11)
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