By Nick Bunkley, Crain News Service
DETROIT (May 28, 2013) — The traditional summer auto plant shutdown is quickly fading away.
With tight inventories, rising sales and customers flocking to big, profitable vehicles, the Detroit 3 no longer can afford to halt plants for two weeks.
Higher demand for pickups, SUVs and crossovers is largely behind the decisions to skip or shorten the downtime that historically has coincided with the beginning of the new model year.
Plant closings and flexible labor contracts have broken the cycle of vehicle makers' overproducing and discounting. But the flip side is that auto makers have to stretch their capacity quickly to keep up when the market is on an upswing.
Ford Motor Co. is reducing its shutdown schedule for a second consecutive year, with 20 of its 31 plants being idled for one week instead of two. Chrysler Group L.L.C. is eliminating time off at three of 10 assembly plants, all six engine plants and five of six transmission plants; four Chrysler assembly plants will shut for one week.
At General Motors Co., whose May 1 inventories were the largest of the three companies, sources say most plants will keep their usual shutdown plans in early July. But a plant building large crossovers is expected to stay open, and a heavy-duty pickup plant will be idled for just one week. A GM spokesman declined to reveal specifics.
The transplant auto makers have historically not scheduled significant summer downtime for model changeovers and have not announced any major changes this year; most of their plants will close for no more than a week around the July 4 holiday.
Ford said its reduced downtime will increase output in North America by 40,000 units.
"Our plan is to continue to match our production capacity to sales demand, and at the moment we're tight on just about everything," Jim Tetreault, Ford's vice president of North America manufacturing, told Automotive News. "We'll employ a similar strategy next year if the demand's there."
From mid-2012 through this year, Ford will have raised its annual North American capacity by 600,000 vehicles, largely by adding shifts and adjusting line speeds, Mr. Tetreault said. The company says about 75 percent of its plants now have at least three crews or shifts, with some powertrain plants running 140 out of 168 hours in a week. Workers at those plants generally work shifts of up to 12 hours, three or four days a week, with little or no plant downtime on weekends.
One consequence of reducing plants' downtime is that Ford will need to hire more temporary workers to fill in when employees schedule that vacation at another time, Mr. Tetreault said.
The industry has been buoyed by predominately positive economic news, as a recovery in the housing market and largely steady gasoline prices push pickup sales higher, while declining unemployment and rising consumer confidence help Americans feel more comfortable making big purchases.
U.S. light-vehicle sales were up 7 percent through April, and analysts forecast a similar gain for May. The rebound in truck sales has allowed each of the Detroit 3 to increase its market share this year at the expense of Japanese and Korean rivals.
"The positive note is that the manufacturers are looking for more capacity and trying to get the most out of their capacity, and that tells you the strength in this business," said George Magliano, an analyst with IHS Automotive.
Now—with low inventory on many new and popular models—Detroit doesn't want to risk missing out on sales during the second half of the year, when forecasts call for the industry's sales pace to increase further. But the auto makers still need to proceed cautiously, in light of uncertainty such as the government sequester created by Congress, Mr. Magliano said.
"The question is whether they're going to get ahead of themselves," Mr. Magliano said. "If sales weaken any further over the next couple of months, they might either need to clean out inventory or idle plants."
May's sales results could provide evidence that the dip in April's seasonally adjusted annualized rate (SAAR) of U.S. sales was not signaling a larger slowdown on the way. LMC Automotive and TrueCar each projects a SAAR of 15.2 million in May, up from 14.9 million in April. April was the first time in six months that the SAAR fell to less than 15 million.
Doing things 'differently'
Chrysler said last week that it will skip a shutdown at plants that assemble the Jeep Cherokee and Grand Cherokee, Dodge Durango and SRT Viper. Plants that make Ram heavy-duty pickups, the Dodge Dart, and other Jeeps will be down for one week, while four assembly plants will have the full two weeks off.
GM spokesman Bill Grotz declined to comment on schedules for individual plants but said GM "does things a bit differently" from in the past, when most plants would be idled simultaneously in early July.
"Today, plant downtime is driven more by specific vehicles' life cycles and in-market demand," he said.
Still, most of GM's busiest assembly plants will have their traditional two-week shutdown, sources say. Those include Lordstown, Ohio, where the Chevrolet Cruze is assembled; Detroit-Hamtramck, which makes the Chevy Volt, Malibu and Impala; and Kansas City, Kan., which produces the Malibu and the Buick LaCrosse. UAW Local 1112 in Lordstown confirms plans for two weeks off on its website.
GM's plant in Delta Township, Mich., which builds its trio of recently restyled and fast-selling large crossovers, is expected to stay open throughout the summer.
GM's Flint, Mich., plant, which turns out heavy-duty pickups, will be idled for one week in July, instead of the normal two weeks, to keep pace with brisk demand, a source said. GM's plant in Lake Orion, Mich., where the Buick Verano and Chevy Sonic are assembled, also will have just one week off, according to the Web site of Local 5960 there.
GM's pickup plant in Fort Wayne, Ind., will have three weeks of downtime starting June 24 to change over to the redesigned Chevrolet Silverado and GMC Sierra. GM already makes the new version of those trucks in Silao, Mexico.
Reporter Mike Colias contributed to this report, which appeared in Automotive News, a Detroit-based sister publication of Tire Business.Fewer shutdowns
Domestic auto makers are becoming less inclined to shut plants for two weeks for the traditional model-year changeover.
Chrysler: Jefferson North (Grand Cherokee, Durango); Conner Ave. (Viper); Toledo North (Cherokee)
GM: Delta Township, Mich. (Traverse, Enclave, Acadia)
1 week of downtime
Ford: Chicago (Explorer, Taurus); Louisville, Ky. (Escape); Wayne, Mich. (Focus); Oakville, Ontario (Edge, Flex); Hermosillo, Mexico (Fusion, MKZ); Cuatitlan, Mexico (Fiesta)
Chrysler: Toledo Supplier Park (Wrangler); Belvidere, Ill. (Dart, Patriot, Compass); Toluca, Mexico (Journey, Fiat 500); Saltillo, Mexico (Ram)
GM: Lake Orion, Mich. (Sonic, Verano); Flint, Mich. (Silverado, Sierra)