Production to Grow 12% in 2011

It may seem odd to characterize North America's projected production increase of nearly 40% this year as “cautious,” but the term fits.

Auto makers are on track to build roughly 12 million light vehicles this year, compared with 2009's decades-low 8.56 million, while utilizing only 65% of their capacity in the U.S., Canada and Mexico, Ward's data indicates.

Last year's 49% utilization rate largely was a reaction to bloated inventories and extended bankruptcy-related shutdowns at General Motors Co. and Chrysler Group LLC.

In contrast, 2010's low utilization rate is a result of strategic discipline, as auto makers allow demand to dictate their build rate, rather than use production to push the market upward.

Combined LV sales in the U.S., Canada and Mexico are forecast to rise 9% in 2010, finishing at a projected 13.7 million units. As a result of the new build strategy, inventories, which began the year below 2 million units, remained at or just below 2.2 million units through the first three quarters as sales and production increased slowly but steadily.

However, with the ramping up of the '11 model year, inventories have been on the rise, especially in the fourth quarter. U.S. stocks, alone, are expected to surge to 500,000 units by the end of December, with domestic-built vehicles accounting for more than 90% of the increase.

Ward's is forecasting a continuation of cautious LV production growth in North America, rising 12% to 13.4 million units in 2011, against a 16% increase in sales for the region, resulting in 15.8 million cars and light-truck deliveries.

At projected levels, OEMs collectively are expected to operate at 73% of capacity.

Several plants are set to end production in 2011, which should ease the under-utilization rate somewhat.

However, the majority of North America's lost capacity associated with the shutdowns will be offset by production at new or reconfigured plants in 2011.

Ford begins making its '11 Focus compact car late this year at its retooled Michigan Assembly plant, the former Michigan Truck facility in Wayne, MI, and could build as many as a quarter-million vehicles at the plant in 2011.

GM is set to restart its Orion, MI, plant, to produce the Chevy Aveo in second-half 2011, just as Volkswagen of America Inc. revs up its new Chattanooga, TN, operation. Both facilities could build as many as 100,000 vehicles in the year's second half.

Toyota says it will begin Corolla production at its new Blue Springs, MS, facility in fourth-quarter 2011, adding some 30,000 units to the industry's total 2011 build.

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