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North American Production Shifts to Steady Mode

Executive Summary

The next two years will be marked by overtime and manufacturers matching capacity to rising demand. But there will be typical plant downtime for inventory control of slow-selling vehicles, as well as production shutdowns for major redesigns.

The North American automotive market has entered a period of steady going after several turbulent years caused by recession and destructive weather, and WardsAuto’s production forecast for the region calls for some normalcy for the next two years.

Since 2008, year-over-year comparisons, especially at the monthly and quarterly level, have seen fluctuations sometimes marked by extreme, double-digit percentage changes.

For 2013, WardsAuto is forecasting a 3.0% increase from 2012 to 15.85 million units, followed by 2.7% growth in 2014 to 16.27 million – moderate changes compared with the past five years.

These next two years will be marked by several plants making strong sellers running overtime, and auto makers matching capacity to meet rising demand after having to rebuild it since the crash of 2008-2009.

Another sign of a return to normalcy will be typical sporadic plant downtime for inventory control of slow-selling vehicles, and production shutdowns for major redesigns now that manufacturers have returned to conventional investment cycles.

Inventory control and model changeovers will leave the first and fourth quarters of 2013 flat with year-ago totals, with the year’s growth squeezed in between.

First-quarter 2013 output will end at an estimated 3.95 million units, equal to prior-year’s total.

Some production was overdone in 2012 and first-quarter 2013 output was hurt by inventory-control slowdowns, particularly at General Motors and Chrysler.

Also, first-quarter output was missing last year’s 18,000-plus units of the Mazda6 built at the Ford-Mazda Flat Rock, MI, plant, which ended production of the vehicle last summer. A new version of the car is being imported from Japan.

Additionally, GM’s Arlington, TX, plant had first-quarter downtime, apparently resulting from preparations for the addition of a third shift in January.

Although there will be some slowdowns in the second quarter, too, April-June output is forecast to rise 5.2% from year-ago. The third quarter will increase 7.7% and the final quarter will be flat with the last three months of 2012.

The WardsAuto forecast expects further inventory-related shutdowns at Chrysler and GM in the second quarter. However, GM’s U.S. production also will be checked by one of four plants beginning changeover to the next-generation GMT900 platform.

GM is expected to have more downtime than first figured into the forecast at its Silao, Mexico, plant, which begins production of the new pickups in the second quarter. Builds of new trucks at the other plants will be spread from this summer to the beginning of next year.

Additional downtime at the end of March and in the second quarter at GM’s Fairfax, KS, plant, where it builds Buick LaCrosse and Chevrolet Malibu, also will dampen the auto maker’s production outlook for first-half 2013. Inventories of both vehicles are high, and GM also is making some refinements to the cars for the ’14 model year.

Chrysler is expected to have some second-quarter downtime in the U.S. and Canada related to surplus inventory, but volume will be aided by the resumption of production at the Toledo North plant in Ohio. The plant has been down since summer 2012 while retooling for the new Jeep Cherokee. Chrysler also resumes production of the Volkswagen Routan at Windsor, ON, in the second quarter.

Another plus in the April-June period is the launch of first-time North American production of the Nissan Note at the auto maker’s Aguascalientes, Mexico, plant.

Third-quarter output will be boosted by Ford starting production of the Ford Fusion at the Flat Rock plant, in addition to its current assembly source in Hermosillo, Mexico. Also, Chrysler begins production of the Ram ProMaster fullsize van at Saltillo, Mexico.

Toyota is slated in July-September to begin building the next-generation, and high-volume, Toyota Corolla at Cambridge, ON, and Blue Springs, MS.

Fourth-quarter production will be flat with year-ago totals, even though Nissan opens a second plant at Aguascalientes. Slowdowns for major model changeovers will offset gains at Nissan and other manufacturers.

Also in October-December, Toyota follows up Corolla with production of the redesigned Highlander at Princeton, IN.

There will be some stops and starts in 2014.

Mazda begins the year with a new plant in Salamanca, Mexico, building small cars, while Honda launches production in Celaya, Mexico, of the Fit and a small cross/utility vehicle.

Volkswagen begins production of the Golf at Puebla, Mexico, after ceasing output of the car in North America years ago. BMW begins building the new X4 at Spartanburg, SC, and GM brings back the Chevrolet Colorado and GMC Canyon at Wentzville, MO. Ford begins manufacturing the Europe-based Transit fullsize van at Kansas City 1 in the spring.

Also in 2014, two Ford U.S. plants could see some slowdowns during retooling for the next-generation F-150 pickup.

Finally, GM will be closing its Oshawa, ON, No. 2 plant in 2014, and Chrysler ends production of the Jeep Compass and Patriot at Belvidere, IL.


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