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“The industry is in good shape. We’re not over our skis,”CEO Tim Leuliette says. “Not just Visteon, but as an industry we are all running pretty good balance sheets and being very conservative.”
GM Arlington assembly plant employee Mark Magallon shines Chevy Tahoe badge.
North American parts makers appear generally prepared to meet supply demands from automakers potentially ramping up toward production of 18 million light vehicles over the next few years, a level that would mark a stunning and perhaps seam-busting 9.4 million-unit expansion since 2009.
But capacity constraints, the lure of emerging markets and a scramble for qualified workers remain industry headwinds.
In a new era of cautiousness following a U.S. recession still reverberating in global markets, many parts makers continue to tread lightly when it comes to expanding manufacturing capacity, despite solidly rebuilt balance sheets.
“Everyone is still being cautious and, frankly, trying to be responsible about investments so we don’t get into a position where we have a bunch of overcapacity,” says Grace Lieblein, vice president-Global Purchasing and Supply Chain at GM.
“And it depends on the supplier, in terms of how much flexibility they have, but I know everybody is looking forward and taking it one step at a time rather than jumping in like they may have done in the past,” Lieblein tells WardsAuto.
That is not to say, however, that all suppliers are sitting tight. A number of parts-making heavyweights now are doubling down in the region by adding manufacturing brick-and-mortar and bolstering R&D and sales operations.
Among the recent activity, French interiors specialistopened in July a new $30 million headquarters outside Detroit, joining Japanese giant Seiki, which in the same week cut the ribbon on a $13 million sales and technical center near the city.
“I would not be surprised if there was another () plant coming into North America at some point in the future,” says John Koenig, president-sales & marketing, Aisin World Corp. of America. Koenig’s group is riding a wave of business from , GM and .
CEO Yann Delabriere says the supplier has enough capacity to meet demand, which includes new work from , for the next 18 months.
But after that, he adds, “we will resume more active growth in North America.”
Other actions this year include Cooper Tire & Rubber investing $35.5 million in a global technical center at its Findlay, OH, headquarters aimed at advancing tire technology; component maker Toyoda Gosei North America will put $7.9 million into its suburban Detroit operations; and vehicle-trim-specialist SRG Global will double the size of its Central Mexico facility to accommodate new-product offerings.
The growth comes on the heels of companies such as, Kiekert, , Durr and Halla spending millions of dollars in North America to expand their capabilities.
The actions underpin a capacity utilization push by automakers, already capable of building 17.8 million LVs in North American this year if they choose. WardsAuto forecasts output of 16.7 million units this year.
But many analysts predict “18-by-18,” or an outlook for automakers to eclipse 18 million units in the 2018 timeframe. The uptick is fueled by new plants coming online or expansions at existing assembly facilities by a host of OEMs, including, Mazda, , Chrysler, and GM.
“It’s possible,” Jim Lentz, CEO ofNorth America, says of 18 million units. “Demand will sustain at least 17 million. Whether we get to 18 million or not, it’s in the ballpark.
“A lot of suppliers are stressed doing what we’re doing today and they are basically at maximum capacity in many cases,” he adds. “So that next step, as long as they have a similar view as the OEMs, (17.0 million to 18.0 million) is possible.”