January 18, 2010
Car production set to crank up 69% in quarter
After a long spell of cutting production and closing plants, North American automakers are preparing to build substantially more cars as evidence mounts that the economic recovery is gathering momentum.
Collectively, the industry plans to make 2.93 million cars and trucks in North America between Jan. 1 and March 31, according to Ward’s AutoInfoBank, up 69% from 1.73 million built in the first three months of 2009. That’s still less than the 3.58 million vehicles assembled in the first quarter of 2008, but it is still some of the first tangible evidence the long-anticipated recovery is real
“Consumers may be scared, but they don’t like that rusting hulk in the driveway,” said Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor. His 2010 U.S. sales forecast of 12.4 million new cars and trucks is a bit more optimistic than other experts who expect something closer to 11.5 million. Either, however, would be substantial improvement from the 2009 mark of 10.4 million, the industry’s lowest volume in nearly 30 years.
The production increase is important because it means workers will log more hours and earn slightly bigger paychecks. In a few cases, idle workers could be recalled if additional shifts are needed. It also means that dealers will have enough vehicles to satisfy customers seeking a particular color or option combination.
The average age of vehicles in American driveways has risen from 6.7 years in 2001 to 8.1 years in 2008, according to R.L. Polk & Co.
Toyota’s production plan is the industry’s most ambitious for the near term. It expects to make 155,000 cars and 163,100 trucks, SUVs and minivans for the first quarter – an increase of 113%. But GM and Ford also will more than double passenger car production, with Chrysler boosting car output by 92%, which should benefit the Sterling Heights assembly plant, where workers assemble the Chrysler Sebring and Dodge Avenger.
AutoAlliance in Flat Rock, which makes the Ford Mustang and Mazda6, will nearly quadruple output to 35,500 cars from 9,800 a year earlier.
Inventories of new cars and trucks averaged 52 days’ supply at the end of 2009, according to Ward’s, down from 92 days a year earlier. Normally manufacturers try to keep about 60 days’ worth in the pipeline.
Chrysler, in particular, is running short of such models as Dodge Caliber and Chrysler Sebring.
“Despite problems we might still be having in the labor market, these planned output increases do reflect belief that we will see a significant rebound,” said Mark Perry, an economics and finance professor at the University of Michigan Flint.
Economic data supports the notion that the battered manufacturing sector is beginning to heal. Industrial production increased for the sixth consecutive month in December. The measurement’s 4.5% growth rate for the six months ended Dec. 31, marked the largest six-month gain since early 1998, according to the Federal Reserve.
Manufacturing overtime hours averaged 3.4 hours per worker in November and December, according to the Bureau of Labor Statistics, the highest since October 2008.
“The industry expects last year’s hibernation to end,” said McAlinden. “The bear will stick his nose out of the tent.”
LINK:
Car production set to crank up 69% in quarter | freep.com | Detroit Free Press
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