More MBS Coverage DETROIT – Light-vehicle production in North America will bottom out in 2005, rise slightly in 2006 and then take off in the latter part of the decade, but record high-build levels are not in the foreseeable future.

Wards' most recent North American production outlook predicts production will soar to 17 million units later in the decade, far ahead of 2005's forecast total of 16.04 million units and about 0.5% below the 16.22 million of both 2003 and 2004. The turnaround will begin in 2006 with a small increase to 16.23 million.

But while vehicle sales in North America eventually are expected to surpass the peak years of 2000-2001, when they topped 20 million annually, production through 2012 won't come close to matching record output of 17.6 million and 17.7 million in 1999 and 2000, respectively.

However, if the economy continues to grow, annual production is forecast to remain strong until 2012. The continent then is expected to slide into recession if the economic cycles of the past 35 years continue.

Companies with sales momentum and a high mix of new products will continue with strong sales in 2005 and 2006. Of the major manufacturers, Toyota North America Mfg. Inc., Honda of America Mfg. Inc. and Nissan North America Inc. will post significant production gains in 2005. Toyota and Honda will continue further gains in 2006, but most other auto makers will remain flat or post declines.

There also will be an influx of regional new products from smaller auto makers, including Subaru of Indiana Automotive Inc. and Volkswagen de Mexico.

Less-severe production cycle curves are predicted for two reasons – both related to continued growth by foreign-based manufacturers.

Big Three production, which supplies huge dealer networks through big and complex delivery pipelines, is not forecast to grow significantly. As production capacity grows for smaller auto makers, such as Toyota, Honda and Nissan, they will have the advantage of keeping tighter reins on their delivery systems and their days' supply of inventory.

There will be less need for sudden – and often overly long – bursts of production to make sure dealers have enough stock to meet higher demand. Ultimately, the overall industry will be reacting more quickly to increases and decreases in demand.

In the future, for example, a normal supply might be five or 10 days lower than average.

Second, most auto makers will be wary of falling into an overcapacity situation like the one currently plaguing the Big Three, where they are forced to rely too heavily on manufacturer- subsidized incentives in order to keep assembly lines running as demand wanes.

hstoddard@primediabusiness.com