DETROIT (July 12, 1:30 p.m. ET) — Despite slow jobs growth in the United States and a tepid economy, automakers are maintaining solid North American production schedules this summer.
Mike Jackson, IHS Automotive's director of North American forecasts, says U.S. sales have slowed a bit from the strong monthly rates early this year. But it's still going to be a good year for the industry.
Jackson predicts the North American auto industry will produce nearly 14.9 million light vehicles this year. That would be up 13 percent over 2011, and it's slightly higher than IHS' initial forecast of 14.7 million units in 2012.
From July through September, North American assembly plants will produce 3.45 million light vehicles, up 8 percent from a year earlier and the strongest third quarter since 2007, according to a forecast by IHS, which is based in suburban Detroit.
Volkswagen AG (up 27 percent in the third quarter) and Toyota Motor Corp. (up 24 percent) will lead the charge.
A year ago, Volkswagen's Chattanooga plant was just starting to ramp up production of the Passat sedan, while Toyota's suppliers were struggling to recover from Japan's devastating earthquake.
Honda Motor Co., which also suffered from the earthquake, will raise vehicle production by 16 percent. But Nissan Motor Co., which avoided big quake-related production cuts last year, will reduce third-quarter output by 1 percent.
“If we compare production to last year, we're having a fantastic year,” Jackson said. The year-to-year production increase is “almost nine assembly plants.”
Also, there are several structural trends that favor North American producers.
First, the strong yen has put heavy pressure on Japanese automakers to shift more production to North America.
Yes, the yen might weaken. But automakers prefer to produce vehicles in the same regions where they are sold. That shields them from unpleasant currency surprises - a major motivator for Toyota, Honda and Nissan.
Second, the German luxury automakers view North America as a cost-effective export base. Mercedes and BMW have U.S. assembly plants, and Audi plans to build one in Mexico.
Third, Mexico has emerged as a versatile export base for automakers, thanks to its trade treaties with the United States, South America and Europe.
True, Brazil and Argentina are trying to limit Mexican imports. But Mexico remains a good location for automakers that produce “world cars” - such as the Nissan Micra - that can be sold in multiple markets.
Jackson concludes: “North America is in the best position it's ever been in to produce vehicles for a broad range of global markets.”