No one is ready to start celebrating yet, but automakers, suppliers and watchers of the North American auto industry seem to think the “near-death experience” of the past few years might finally be behind it.
“Today the automotive sector in the U.S. is on a more solid foundation for sustainable growth,” said Sergio Marchionne, CEO of Fiat SpA and Chrysler Group LLC.
Bankruptcies and a buying public that stopped buying — resulting in North American sales falling to less than 9 million in an industry that had considered 14 million sales to be a bad year — forced the auto industry to reshape itself, get lean and shut down poor-selling product lines and unneeded capacity.
Today, there are companies throughout the industry that have not only survived in a smaller playing field, but even make a profit, said Jay Baron, president and CEO of the Center for Automotive Research, the Ann Arbor, Mich.-based organizer of the Management Briefing Seminar, held Aug. 1-4 in Traverse City.
William Kozyra, CEO of fuel-tank maker and fuel-system supplier TI Automotive of Auburn Hills, Mich., estimates the “break-even point” is now, with annual production as low as 10.5 million vehicles, thanks to the work suppliers and automakers have done to reduce their costs.
“If you've come through this downturn, and you're still standing, you should be happy because you made it, and you're a survivor,” he said.
For four days, industry veterans expressed relief to have the last few years behind them. That sentiment was expressed by top speakers like Marchionne, as well as in panel discussions and chatter at bars and in hallways. But they also were cautious about committing too firmly to specific claims for future growth. There are too many other issues clouding any vision of how steady growth might be.
Raw material prices have climbed steadily, for one thing, and not just for plastics but for steel, aluminum and other metals. Automakers and suppliers need to understand what material fluctuations will mean for part costs, Kozyra said.
The auto industry is a major player in resin buying, added Jim Kamsickas, co-CEO and president of International Automotive Components North America and Asia. However, the industry lags behind market sectors like packaging, and no one auto supplier, no matter how large, has the mass purchasing power to fully sway prices.
Investments in new fuel-sipping technologies will be a boon for some companies, while regional growth will open opportunities for others.
The key for suppliers will be finding where they want to place themselves in terms of both products and geography, he said.
Suppliers including IAC, based in Southfield, Mich., will be taking careful steps in future spending, and putting their money where it will go the farthest, he said. That could mean developing new products carmakers want to buy, building plants in regions where new car investment is increasing or purchasing capital equipment that can reduce production costs — such as through automation or thinner-wall parts, which trims resin prices per component.
“The solution isn't going to be, just go to into emerging markets at the cost of existing markets, but to balance your investments,” added Don Walker, CEO of interior and exterior parts supplier Magna International Inc.
China, India, Brazil and Eastern Europe remain a focus for new production for global companies, but at the same time, Volkswagen AG is preparing to launch production out of its new plant in Chattanooga, Tenn., and Nissan is expanding production in Smyrna, Tenn., for its Leaf electric vehicle.
Marchionne knows the industry will not have it easy in North America, or globally. But he called on industry and government leaders to believe in a strong future. After all, many were ready to give up on Auburn Hills, Mich.-based Chrysler when it entered bankruptcy protection. Now, he pointed out, the company has new vehicles coming on the market and he's planning for a long life that will extend well after his own retirement someday.
“For a while, there seemed to be a competition to write the best obituary before the body was even cold,” he said.