DETROIT – Chrysler, along with the rest of the U.S. auto industry, is facing a dilemma of satisfying increased customer demand without investing in new brick and mortar, a top executive says.

“The industry had been dealing with overcapacity some time before the crash and that situation led to profit-draining practices, mainly high incentives and overproduction,” says Scott Garberding, recently appointed Chrysler purchasing chief after a stint as senior vice president-manufacturing.

“Now that the market is recovering, we cannot afford to repeat the mistakes of the past by making huge capital investments,” he says during a manufacturing conference here, noting U.S-based automakers closed 27 factories in restructuring since the 2009 recession.

Chrysler, which has shuttered four assembly plants in the past four years, has seen U.S. sales rise from 927,200 units in 2009 to 1,641,480 in 2012, according to WardsAuto data. Through August, deliveries were up 9.6%, compared with year-ago, to 1,207,880 vehicles.

Garberding says a number of steps have been taken to increase output from its North American manufacturing base, including incorporating parent Fiat’s World Class Manufacturing process, which focuses on continuous improvement and eliminating waste and loss.

A key part of WCM is empowering workers, which Chrysler did by making a concerted effort to cleaning up its assembly plants. Garberding says there were two benefits from repainting the factories and scrubbing them from top to bottom.

“Employees saw visible change when they walked into a plant that was becoming a different place than the one they worked in a few years prior,” he says, adding the move boosted morale. “And equally important is that machines run better and more efficiently when they’re clean.”

Since 2009, Chrysler has invested more than $5.2 billion in its factories and added more than 22,100 new jobs, including 11,400 hourly positions, Garberding says.

Under terms of Chrysler’s agreement with the UAW union, the automaker was able to implement alternative-work schedules, in which plants operate with three crews working two shifts, with each crew scheduled for four 10-hour days and no overtime pay.

The shift schedule has been a key factor in expanding capacity at several assembly and powertrain facilities, as well as three Chrysler transmission operations in Kokomo, IN.

“Not every worker was enthusiastic,” Garberding says, referring to widespread protests when the alternative-work schedule was put in place. “But we worked with the UAW to address employee concerns and came up with a schedule that maximizes time with families.”

Under the guidelines, a workweek’s last shift ends at 4:30 p.m. Saturday, with the new workweek beginning at 7:30 p.m. Sunday night, allowing every employee to have off Saturday evening and Sunday during the day.

The UAW contract allows for one crew to work overtime one out of every three Sundays. But due to the large number of volunteers, Chrysler has not forced any worker to take the additional shifts.

Under the new work schedule, Chrysler Indiana Transmission Plant No.2 in Kokomo has seen its short-term quality metrics improve while annual output has increased to 530,000 units annually from 400,000.

Powertrain manufacturing has improved it efficiency as Fiat-Chrysler adopted a standard bill of process that shortens transition time to new products and minimizes loss of production during changeover.

“We’re relying primarily on CNC equipment for all of our machining,” he says. “The use of CNC allows us to react quickly to changes in market demand, and we can reconfigure a line simply by changing fixtures, tooling and retooling the software.”

That strategy allowed Chrysler to switch production of 1.4L Fully Integrated Robotized Engines to the new 2.4L Tigershark mill at its Dundee, MI, engine plant in just two weeks.

“If you contrast that to a few years ago, it’s a totally different world,” Garberding says.

Chrysler additionally has invested $160 million in new equipment at its stamping plants, increasing capacity by 48,000 hits per day. The automaker is making greater use of computer simulation software in the stamping process as well, allowing greater dimensional part accuracy.

The automaker’s Toledo, OH, plant, which produces the Jeep Wrangler and all-new Cherokee, is benefiting greatly from Chrysler’s capacity strategy as well, says Garberding.

Wrangler production increased from 85,000 units in 2009 to 193,000 in 2012. This year, 149,000 Wranglers were built at the facility through August.

The increased output was achieved by staggering worker breaks so the lines never stopped, as well as adding two 10-hour shifts on two out of every three Saturdays. The line rate at Toledo has increased several times, going from 36 units an hour in 2010 to 42.1 in 2012.

Although Toledo is a 2-shift operation, a third shift was added in the paint shop to further increase capacity.

“To support a new operating pattern, we added accumulators, where bodies wait for paint to receive them,” Garberding says. “This allows us to maximize the use of paint, which is the overall bottleneck in Toledo.”

While much progress has been made, Garberding says squeezing even more capacity out of plants is an ongoing challenge for the entire U.S. auto industry.

“Undoubtedly, there are tough decisions ahead for the industry,” he says. “Managing growth will continue to require flexibility and discipline, close cooperation between OEMs and suppliers and trust-based relationships between OEMs and unions.”

bpope@wardsauto.com