By: David Sedgwick
November 18, 2013
DETROIT ‒ Automotive suppliers have been content to let their plants run around the clock rather than build new factories or assembly lines to meet high demand. Until now.
According to a September survey by the Original Equipment Suppliers Association, 84 percent of suppliers doing business in North America said they are "somewhat" or "very confident" that their companies will make capital investments in 2014 and 2015.
An additional 11 percent said they were "slightly confident" they would add capacity, and only 5 percent said they did not plan any capital expenditures.
Survey respondents were more willing to invest than they were in July, when 66 percent were planning for "significant" or "somewhat increased" capital investments.
The upbeat survey comes at a time when North American light-vehicle production is on course to hit about 16.1 million units this year, up from 15.5 million units in 2012, according to LMC Automotive, a consulting firm based in suburban Detroit.
In 2014, North American vehicle production is expected to rise 3 percent to 16.6 million units, says LMC.
As demand rises, automakers are planning to expand capacity in years to come. According to a Morgan Stanley study, carmakers in North America will add 864,000 units of capacity in 2014, plus 400,000 units in 2015.
So it comes as no surprise that the OESA survey, which drew 85 responses from OESA's 450 members, showed suppliers at their most optimistic since January 2012.
Sixty-four percent said they had grown either "somewhat" or "significantly more optimistic" about their prospects for the next 12 months. In July, only 44 percent of respondents were more optimistic.
The survey also suggests that suppliers are struggling to keep up with demand. One respondent said his company was "busting at the seams," while another said "our growth plans continue to be aggressive."
Asked to identify their most pressing needs, 29 respondents said they were focusing on personnel issues, such as hiring more engineers, retaining employees and attracting skilled trades.
Fourteen suppliers said capacity constraints were their most serious challenge, and 11 identified product launches as their top concern.
Neil De Koker, CEO emeritus of OESA, said in September that North American automakers couldn't add any more workers to existing assembly plants and now must build new ones. "Now it's bricks and mortar," De Koker said.
At the time he was referring to North American automakers. Now it's true for suppliers, too.