North American assembly plants are failing to get flexible, according to the latest capacity utilisation data compiled by SupplierBusiness.com. Some plants are operating at optimum capacity, while others are utilising just a third or in some cases a quarter of available capacity. Furthermore these poor results come at a time when OEMs have been offering huge incentives to keep plants busy.
The Big Three OEMs will be pushing hard to close plants and increase flexibility between plants as part of the forthcoming round of negotiations with the United Auto Workers (UAW) union.
“Most plants produce just one model, which is a nonsense when product life cycles mean that the demand for that model will inevitably vary”, said Gareth Davies, analyst at SupplierBusiness.com. “Combine this with the economic environment and it is virtually impossible to use capacity efficiently.”
This year’s round of UAW negotiations, which begin next month and cover a period of 3 years, are expected to be the toughest yet.
Ford currently has the best utilisation rate of the Big Three manufacturers at 90% but is nevertheless embarked on a programme to reduce capacity by a million units from the beginning of 2001. 590,000 units is coming from the closure of three plants – Edison, Ontario Truck and St. Louis. Two other plants under threat are Ohio and Cuautitlan.
The fact that DaimlerChrysler’s North American operations recently cancelled plans to build a new flexible plant in Ontario reflects short-term cash flow problems, but also desperation that the only way to get flexible would be to start again from scratch. DC already has almost half a million units excess capacity.
GM has nearly a million units excess capacity. Any turnaround of this giant will inevitably involve some very drastic action.
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