South Korean automaker Hyundai Motor Co. plans to open its first U.S. assembly plant in March. Toyota Motor Corp.'s newest assembly plant is being built in San Antonio, and vehicles turned out by DaimlerChrysler AG's U.S.-based Chrysler group are gaining a styling and sales edge.
But the outlook for the U.S. auto industry overall remains dim.
``We're seeing significant macroeconomic and consumer-product problems,'' said J.T. Battenberg, Delphi Corp. chairman, chief executive officer and president, in a Dec. 10 conference call. ``There are low U.S. production levels, record commodity price increases, some international slowdowns - particularly in China.
``All of these near-term challenges are very real and they're impacting our results.''
Standard & Poor's of New York estimates North American auto sales will remain at about 16.5 million vehicles, level with sales for the past two years.
Some brands will do well, including those of Asian automakers that are continuing to improve their sales numbers in North America. Even among North American-based carmakers, some specific models are in demand, such as Chrysler's 300M sedan and Ford Motor Co.'s new hybrid Escape sport utility vehicle.
Most U.S.-based carmakers, though, are suffering from backlogs on dealers' lots that are prompting production slowdowns - which in turn affect suppliers, said S&P analyst Martin King.
``Suppliers with thin profit margins, a high concentration of sales to General Motors [Corp.] and Ford, a highly fixed cost structure or exposure to raw material price fluctuations are likely to face increased financial stress during 2005,'' King said.
Troy, Mich.-based Delphi is cutting another 8,500 jobs from its global workforce. Those cuts come in addition to 9,000 workers let go in earlier cost-cutting efforts.
At the same time, suppliers are battling increased costs for raw materials - both resin and steel.
Delphi Chief Financial Officer Alan Dawes estimates his company paid an additional $300 million for its materials in 2004, with no sign of easing prices.
Smaller suppliers feeling the pinch have even less leverage in seeking relief from their own suppliers or customers, King noted. They also have less access to bailout funds, and what is available is more expensive to borrow.
Money is available to some firms making in-demand parts. Dawes estimates Delphi will spend $70 million to $80 million to support its suppliers and ensure a continued flow of products.
That help may not last for long though, King warned.
``There is likely to be some support down the supply chain, but that will depend on the suppliers,'' he said. ``Clearly the customers would prefer their suppliers not go bankrupt or out of business - at least until they can replace them.
``In general, though, the supply base is not going to find a lot of relief.''