DETROIT — A quarter of the way through a tough business year, the North American auto industry has counted up its losses and is taking stock of what the future holds.
But do not expect any agreement on what image is forming inside the crystal ball.
Analysts trying to determine where the industry is bound are seeing a confusing mixture of signs:
Better-than-expected auto sales to start the year but continued signs of dropping consumer confidence that could keep buyers out of dealers' showrooms.
Another drop in the interest rate but rising gasoline prices that may temper enthusiasm for high-profit, low-gas-mileage sport utility vehicles.
The world's biggest automaker, General Motors Corp., has upped its planned production targets for the second quarter by 30,000 vehicles, but the second largest, Ford Motor Co., has warned it foresees the potential for a further softening of the economy.
"I don't think you can find a consensus right now as to how the industry is doing," said automotive consultant Greg Janicki, vice president of CSM Worldwide of Northville, Mich.
"Read tea leaves and you'll get just as good a prediction as anyplace else."
Predictions for total automotive output in North America this year range from a little more than 16 million vehicles to a little more than 15 million.
That difference is important to parts suppliers, who are trying to determine how they should adjust their own production for the year. That affects everything from machinery purchases to work force levels.
"We're producing to what they're ordering," Michael F. Johnston, president and chief operating officer for Dearborn, Mich.-based Visteon Corp., said during an April 20 conference call with analysts. "We're hoping, obviously, that it'll be to a higher level."
Those who can manage a flexible schedule and market their parts to successful vehicles — rather than just relying on big volumes — will do the best, Janicki said.
"The smart suppliers are going to be the ones that can manage the shutdowns well," he said. "This is where business planning and targeting business comes into play."
Automakers ended 2000 with an overabundance of new vehicles in inventory. To adjust, they slashed production through the first quarter of this year.
At Southfield, Mich.-based Lear Corp., 65 percent of its 37 "just-in-time" plants geared to auto production closed for at least a week during the first quarter of 2001 because of the fluctuating automakers' schedules, noted Vice Chairman James H. Vandenberghe.
The interior parts supplier had 13,000 employees temporarily laid off at some point and reduced the overall work force by 6,000 people.
But car buyers actually turned out in higher numbers than expected through the early months, purchasing vehicles at an annual rate of 17 million vehicles. No one expects that pace to continue.
Even the suffering DaimlerChrysler AG's U.S.-based Chrysler unit bested estimates for the quarter. Although it lost $1.2 billion for the three months, analysts had expected it to lose $1.35 billion.
The question now is whether the quarter will set a new standard for the year or if the sales merely were the result of consumers responding to incentives that reduced prices.
"There are so many wild cards and variables out there, be it consumer confidence levels, the [interest rate] cuts or gas prices," said Jeff Schuster, senior manager for North American forecasting for J.D. Power and Associates' Troy, Mich., office. "It's all sales-driven at this stage, now that we're through the inventory problem.
"There's a lot of uncertainty out there."
J.D. Power is predicting improved production through the rest of this year, with carmakers turning out more than 4.1 million vehicles in North America in the second quarter — up from 3.9 million in the first quarter.
By the end of this year, the group expects the industry to turn out about 16 million vehicles in North America, putting it in line to become one of the top five years in sales history.
"A lot of suppliers and automakers alike are planning for a conservative mark, but to hit something like 15.4 million for the year, we'd have to really have the economy and sales fall apart," Schuster said.
Henry Wallace, chief financial officer for Dearborn-based Ford, warned that while sales were better than the company anticipated, they still could drop off.
"In going forward, we do see a softening of the U.S. economy continuing, despite [lower interest rates]," he said. "We do expect that the industry will soften in this quarter and into the next quarter.
"I guess the biggest woolly beast for everybody is going to be the U.S. economy — what does it mean to our sales and our stock levels?"
Injection molder and mirror maker Donnelly Corp. is planning around the 16 million-vehicle level, but also taking action to reduce costs by consolidating operations.
The Holland, Mich.-based supplier announced April 24 it will move its interior and exterior mirror production from Manorhamilton, Ireland, to other European operations and sell the site and electronic actuator program located there to Eaton Corp. for an undisclosed sum.
Most of the 135 Donnelly employees at the site will transfer to Eaton.
"We are cautiously optimistic," Chairman and Chief Executive Officer Dwane Baumgardner said.
Interior specialist Lear, meanwhile, is using what it terms a "more conservative" estimate for the year, of about 15.4 million vehicles.
"We think we need another month or two to get a better read on the environment," Vandenberghe said.