North American Automakers to Reach 100% 12-Month Utilization in 2016

North American manufacturers will reach 100% capacity utilization over a 12-month stretch for the first time ever in second-quarter 2016.

Rising production in the region, thanks to continued growth in sales, some new plants getting up to speed and less impact from major retooling shutdowns compared with the past two years, will trigger new highs in capacity utilization rates.

Following a 6.1% year-over-year LV production increase in Q3 2015, North American output is forecast to increase an average 4% each quarter through first-half 2016, culminating with the trailing 12-month capacity-utilization rate reaching 100% by June.

Capacity utilization is the percentage of production against estimated straight-time capacity, which is based on what each plant could build on two daily 8-hour shifts, five days per week, over 52 weeks.

The industry’s capacity-utilization rate will maintain small gains in second-half 2016, and the entire year will end at 101%, up from 2015’s forecasted 98.5%. The 2015 and 2016 totals will be the two best on record.

There still will be some significant plant shutdowns for retooling during the next nine months, including factories at General Motors and FCA US. But the negative impact will not be as much as in recent years when some high-volume plants, such as Ford’s F-150 facilities, stopped production several weeks for massive changeovers.

Among the major manufacturers in 2016, Ford and Honda will lead the gains, aided by Kia. Utilization rates for most other automakers will be flat or below 2015 levels. Also helping lift 2016’s rate is the planned Q4-2015 shutdown of Mitsubishi’s plant in Normal, IL, which has been consistently running at a capacity-utilization rate of about 25%. The shutdown eliminates capacity of some 230,000 units.

Wrapping up this year, fourth-quarter 2015 capacity utilization is forecast at 95%. Q4’s total will be followed by 101% in Q1 2016 and a whopping 106% in Q2, highest for any quarter on record.

The 12-month trailing rate will flatten in the latter half of 2016, in part because Kia will be opening a new plant next spring in Monterrey, Mexico and the facility will spend much of 2016 ramping up to full speed. It adds a second product in early 2017.

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