After leading U.S. manufacturers into their biggest slump in a decade, vehicle makers may be ready to lead a manufacturing rebound, economists and industry analysts said, according to a report from Bloomberg News.
General Motors, Ford and Chrysler have reduced inventories to about 65 days of supply at the end of March from as much as 102 days at the beginning of the year, according to the industry newsletter Ward’s Communications, Bloomberg said.
It added that the Big Three did so by cutting production 21 percent and offering rebates and special financing to buyers.
“They are very close to having North American inventory in line with sales,” Paul Taylor, chief economist with the National Automobile Dealers Association in McLean, Virginia, told Bloomberg.
“That means that factories can go back on normal shifts.”
Bloomberg said that could mean more orders for textiles, steel, paint, semiconductors, stereos, and hundreds of other products that go into cars and trucks.
“Our customers are still telling us to plan for a pretty robust year,” Susan Skerker, senior vice president for business strategy at Visteon, the third-biggest auto-parts maker, told the news organisation.
U.S. factory business fell to a 10-year low in January, according to the National Association of Purchasing Management. The group’s factory index dropped to 41.2 that month, the lowest since March 1991. Since January, the index has risen, suggesting that manufacturing may be starting to recover.
Visteon laid off as many as 6,000 workers in January, as its biggest customer, Ford, idled 15 plants for a total of 19 weeks. Last week, Visteon had only 20 laid-off workers.
Ford ran its North American plants at regular rates in March and is using overtime hours at factories that build popular new models like the Escape sport utility vehicle, George Pipas, manager of U.S. sales analysis told Bloomberg.
Ford plans to continue normal production – without idling workers or paying large amounts of overtime – as long as consumer demand doesn’t plunge, Pipas told Bloomberg.
Ford will increase production to 1.25 million vehicles in the second quarter, from 1.06 million in the first, he said.
“We’re expecting the second quarter to be relatively good,” Jacques Nasser, president of Ford Motor Co. said in an interview on Bloomberg Television. “We are very confident at the moment. Our product momentum is good, our efficiency momentum is good.”
Bloomberg said that Visteon had sold most of the extra parts that piled up when production slowed at the end of last year, according to Skerker.
The inventory ‘overhang’ was relatively mild at parts makers because many of their products are built only as they’re needed, often just a few hours before they’re shipped, Bloomberg added.
GM has reduced its inventories more slowly than the other carmakers, according to Ward’s. It still has 75 days of inventory on hand.
The vehicle maker expects to have its inventories back where it wants them by June, Paul Ballew, the company’s vice president of vehicle sales analysis, told Bloomberg.
GM last month expanded plans for April plant closing in Michigan, Kansas and Maryland in the U.S. and in Ontario and Quebec in Canada. The company said on February 21 that it would intermittently close 14 factories and assembly lines until mid-June, with some shutting for five weeks.
GM still plans to build 1.3 million cars and trucks in North America during the quarter, up from 1.2 million in the first three months, Bloomberg said.
Stockpiles at Chrysler have fallen to 56 days of supply, which is less than the traditional 60-day inventory target, according to Ward’s. The company hasn’t released production estimates.
Bloomberg News said that Ellen Hughes-Cromwick, a senior economist at Ford, predicted U.S. new light vehicle sales will reach 16 million to 16.5 million this year.
Though down on last year’s record sales of 17.4 million cars and light trucks, that would still make it one of the best three years in motor industry history.