February 28, 2012 in Business

Detroit carmakers race to keep up with demand

Tom Krisher Associated Press
 
Associated Press photo

Laurie Schmald Moncrieff, president of Schmald Tool and Die in Burton, Mich., has just added six workers and may hire another five. She said this could be a challenging but profitable year for the industry.
(Full-size photo)

DETROIT – Auto sales are growing so fast that Detroit can barely keep up.

Three years after the U.S. auto industry nearly collapsed, sales of cars and trucks are surging. Sales could exceed 14 million this year, above last year’s 12.8 million.

The result: Carmakers are adding shifts and hiring thousands of workers around the country. Carmakers and parts companies added more than 38,000 jobs last year, reaching a total of 717,000. And automakers have announced plans to add another 13,000 this year, mostly on night shifts.

But there’s a downside. The newfound success is straining the factory network of the Detroit automakers, as well as the companies that make the thousands of parts that go into each vehicle. This could lead to shortages that drive up prices.

And it also has auto executives in a quandary. They got into trouble in the first place largely because their costs were too high. Now, they fear adding too many workers.

Ford, for instance, is “squeezing every last component, transmission, engine out of the existing brick and mortar,” said Jim Tetreault, vice president of North America manufacturing.

The surge in hiring is good news for communities around the country that saw hundreds of thousands of manufacturing jobs disappear. Starting in 2005, GM, Ford and Chrysler closed 28 factories and eliminated 88,000 jobs. Parts companies cut another 234,000.

Now, if sales hit 15 million by 2015, as some experts predict, the three Detroit automakers could hire another 20,000 people, predicts Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor, Mich.

Laurie Schmald Moncrieff, president of a small parts-manufacturing company in Burton, Mich., said when demand for auto parts collapsed, she shifted production to parts for companies in green energy, aerospace and defense.

Now, automakers and other parts suppliers have her on speed dial, trying to line up everything from fuel pump parts to tools that make hoses. She just added six workers and may hire another five. “I see tremendous growth coming in the near-term,” she said.

Yet like many parts suppliers, she’s having trouble finding people with the skills to run machinery in her plant.

The hiring binge couldn’t have happened at a better time for Michigan. Many of the new auto jobs came around the Great Lakes where the Detroit Three have most of their factories.

Foreign carmakers are also shifting production to the U.S. because of higher sales and the weak dollar, which cuts the profits they get from selling vehicles exported to America.

The sales rebound comes with risks that are familiar to Detroit. Crank up production too much and carmakers have to sell vehicles at deep discounts. Boost production too little, and companies could run short of vehicles such as pickup trucks. And even if they find the right balance now, automakers are leery of raising long-term costs by adding plants and workers.

Growth is putting the squeeze on Hyundai and Kia factories. But the affiliated companies will build as many vehicles as possible at two U.S. plants before constructing a new factory. John Krafcik, Hyundai’s U.S. CEO, said the first choice is to find areas inside the plants that are slowing the assembly lines and fix them, “because plants are expensive.”

GM also will try to handle growth by stretching factories, said North American President Mark Reuss. But he thinks the company will have to hire more workers if sales this year reach 13.5 million or beyond.

Auto factories in North America will reach 90 percent of their capacity if sales hit 14 million, said Michael Robinet, managing director of IHS Automotive Consulting, which forecasts auto production.

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