Bound to Rebound

North American vehicle assemblers will see their available production capacity (net-annual straight-time) mostly decline for the next three years before rebounding back to a level nearly even with 2000.

The net-capacity increase on the horizon for 2008 largely will come from the completion of major changeovers at General Motors Corp. and the ramp-up to full production of its new assembly plant in Delta Township, MI.

Also helping capacity reach a level not seen since 2000 will be new plants from Toyota Motor Mfg. North America Inc., Hyundai Motor America Inc. and DaimlerChrysler AG, as well as some anticipated capacity increases at Honda of America Mfg. Inc.

Net annual capacity — total straight-time capacity adjusted for long-term shutdowns due to model changeovers and the addition and subtraction of new shifts or crews — is 18.23 million units for 2004, compared with 18.38 million in 2003.

Permanent plant closings at GM, including its Astro/Safari plant in Baltimore, MD, will cause a small loss to 18.20 million in 2005. The number will drop to 17.96 million in 2006, stay relatively flat at 17.98 million in 2007, and then rise sharply to 18.63 million in 2008.

GM's planned retooling for major makeovers of its midsize and large SUVs and large pickups over 2006 and 2007 is the primary cause for the industry's capacity dip in those years.

In fact, including capacity for the company at joint-venture operations, straight-time capability for GM products will drop to 29.4% of the industry's total in 2007, likely the lowest ever, before bouncing up to 31.6% in 2008.

A downturn in available capacity does not necessarily mean the industry, or an individual manufacturer, will have lower actual output. On average, North American auto makers as a whole produce to just 90% of their net capacity annually, leaving roughly 1.5 million units of available capacity unused. Overtime can add about 20% to 25% to a typical assembly plant's capability to make up for capacity shortfalls elsewhere.

Ford Motor Co. gradually will undergo a paring of its available capacity through plant closings.

DC's total, which includes Mercedes and Freightliner plants, will remain relatively flat going forward until an increase in 2008, after a new plant in Toledo, OH, is fully ramped up. That will give DC net straight time capacity only 12,000 units below Ford's 3.43 million.

Largely offsetting some planned permanent plant closings at GM and Ford, and thereby keeping capacity close to the 18 million level in 2006 and 2007, will be Hyundai's new plant in Montgomery, AL, opening next year, and Toyota's new truck facility in San Antonio, TX, in 2006.

Capacity at Hyundai's plant will replace currently imported products, while Toyota's new facility will add capacity for products already built in North America.

Ward's North American Annual Net Production Capacity by Company (in millions)