DETROIT — The automotive industry is banking that 1999 will be one more for the road.
One more year, that is, of unprecedented production levels for cars and trucks in North America and Europe. And one more year of survival in the midst of some potentially difficult circumstances that could shake those rosy projections. While optimism is high among industry experts, so is the feeling that the good times do not last forever.
``We're going to have a much slower economy,'' said Van Bussmann, corporate economist with DaimlerChrysler AG in Auburn Hills, Mich. ``We've probably produced cars at the peak of the economic cycle. Even with that, the profit outlook is pretty strong for this year.''
For the past five years, the industry has operated at uncharacteristically lofty levels, with production of about 15 million vehicles yearly in the United States. Historically, production has not been as consistent; levels normally have tailed off and then shot up like a hospital heart monitor year to year.
That has many people in the industry anticipating another good year in 1999 but not ready to break out the champagne just yet.
``There's nothing to suggest that 1999 will not be another strong year,'' said David Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan at Ann Arbor. ``But something could pop up all of a sudden. Right now, consumer optimism is high here, and we've discounted some of the problems in Asia.''
1998 ended on a high note, even with the crippling strike at General Motors Corp. that took a large bite from many suppliers' sales.
Bussmann predicted that 15.4 million vehicles would be produced in the United States during 1998. He had predicted sales of 15 million vehicles at the year's start.
But higher incentives in the second and third quarters and a drop in interest rates bolstered the sale of cars and light trucks, Bussmann said.
Bussmann predicted a slight downturn to about 15.1 million units turned out in 1999.
Ford Motor Co. also is forecasting between 15 million and 15.5 million car and truck units produced in 1998, said spokesman Jim Cain. The fundamentals remain in place for another strong year, Cain added.
``Low inflation, low borrowing costs, job growth, consumer confidence at relatively high levels —all those combine to support a case for another year of strong auto sales for the fifth year in a row,'' Cain said.
A few storm clouds could darken that horizon, though. The United Auto Workers must negotiate new blanket agreements with General Motors, Ford and DaimlerChrysler, leading to the possibility of another agonizing strike by fall.
The Asian economic crisis should remain just that throughout the year, Bussmann said. A quick reversal of fortunes is not expected from a slow-moving bureaucracy in Japan and other Pacific Rim nations. Similar economic troubles brew in South America.
Those problems will continue to affect both production and sales for carmakers and their suppliers. All have made considerable investments to boost volumes in those regions of the world.
With the problems overseas, the number of vehicles produced globally will drop from about 54 million units in 1997 to 52 million units in 1998, Bussmann said.
The trend toward consolidation is another industry concern. The merger last year between Daimler-Benz AG and Chrysler Corp. shocked the industry. Currently, rumors swirl around other potential mergers involving Ford and several foreign carmakers.
Several large, Tier 1 interior-parts suppliers are also the subjects of acquisition rumors. Those acquisitions keep suppliers on their toes, said William Estep, marketing manager of GE Plastics Automotive in Southfield, Mich.
``The [original equipment manufacturers] have taken bold steps that have had an impact on the entire supply base,'' Estep said. ``The pace of change has been considerable. We've had to burn the midnight oil to understand how we can complement the acquiring companies and find new opportunities.''
The plastics industry has shared in some of the bounty from a strong North American automotive business. Parts and resin suppliers have started developing modules — or a combination of parts integrated into one piece — that save money by consolidating components, said Thomas Bouchard, general manager of GE Plastics Automotive in Southfield, Mich.
``I think the overall push from [automakers] is to ask [suppliers] to do more,'' Bouchard said. ``Suppliers turn to us, and we're getting involved earlier. Together, we can put together a pretty good investment package.''
With a modular approach, plastics has proven itself a worthy material contender, not only in parts consolidation but in styling parts with edges or sharp angles, Estep said.
``There are styles that we can do in thermoplastics that are much more challenging in steel,'' he said.
But the modular approach also has a possible downside. Suppliers are being pressured to cut assembly time considerably by integrating parts, Cole said.
``Whatever is done must take carmakers to the next level to speed assembly time,'' he said.
The role of the resin supplier also is changing, Bouchard said. Suppliers now are asked up front to provide material performance and cost estimates to help automakers fine-turn vehicle designs.
Bouchard and Estep identified several new areas for plastics' growth in vehicles. Front-end modules, which could include cross-car radiator supports and headlight bracketry, will be done entirely in thermoplastics, Estep said. On the drawing board for the future are modules that envelope bumper fascias and fenders, he added.
Other key areas are exterior body panels made of thermoplastic — such as Saturn Co. models and the new MCC Smart car introduced last year in Europe by DaimlerChrysler — and polycarbonate windows. Exatec LLC, a joint venture between GE Plastics and Bayer Corp., is developing PC windows at a new facility in Wixom, Mich.
GE now has its resin on more than 5 million front and rear fenders and tailgates.
``We expect another good, solid year,'' Bouchard said. ``We don't see anything on the horizon to change that thinking.''