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Surging auto sales pushing North American suppliers

By: Dustin Walsh

July 23, 2012

DETROIT (July 23, 1 p.m. ET) — In the past year, IAC Group, the big interior supplier, has hired about 350 employees at its Belvidere, Ill., plant to supply interiors for the Dodge Dart and Jeep Patriot and Compass made at Chrysler Group’s plant there.

IAC also held a job fair this month in the Detroit area in search of more than 20 engineers and technical staff members.

Surging North American auto sales are pushing some suppliers to expand and hire more workers — steps they have resisted since the recession. Despite worries about declining demand in Europe, U.S. auto executives surveyed by advisory firm KPMG AG are bullish about their companies’ prospects.

“The survey results clearly demonstrate a U.S. automotive industry that is regaining confidence,” Gary Silberg, KPMG’s national auto industry leader, said in a statement. “Even though the overall economic recovery remains weak, that is not the case in automotive where pent-up demand for vehicles in the U.S. is expected to carry over for years.”

An increasing number of suppliers are running their plants flat out.

North American automotive plants are running at 88 percent capacity, industry analyst IHS Automotive Inc. estimates.

KPMG estimates that plant capacity use in the United States will hit 94 percent by 2018.

Industry executives have said demand for new cars and trucks should continue to drive sales since the average age of vehicles on U.S. roads is at an all-time high of almost 11 years.

Nearly three-quarters of the executives polled by KPMG said their companies will continue to hire people in the coming year, up significantly from the 62 percent in the 2011 survey.

In addition, 67 percent of those polled said their companies have significant cash, and almost the same number said they will invest that cash before year end, KPMG said.

But the executives surveyed are not predicting an overall economic turnaround for years, KPMG said.

More than 80 percent predicted the U.S. economy will remain flat or see only moderate improvement next year, with 60 percent saying a full recovery will not happen until 2014 or later.