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Detroit can’t keep up with auto sales

Cars are selling so fast, the Big Three are struggling to find enough resources to meet demand.


February 29, 2012
by CANADIAN PRESS

DETROIT: North American auto sales are growing so fast, Detroit can barely keep up.

Three years after the US auto industry nearly collapsed, sales of cars and trucks are surging, with potential to exceed 14 million units this year, above last year’s 12.8 million.

As a result, carmakers are adding shifts and hiring thousands of workers around the country.

Carmakers and parts companies added more than 38,000 jobs last year, with industry employment averaging 717,000 for 2011. And automakers have announced plans to add another 13,000 this year, mostly on night shifts.

But there’s a downside. The newfound success is straining the factory network of the Detroit automakers and those companies that make the thousands of parts that go into each vehicle.

This could lead to shortages that drive up prices.

And it also has auto executives in a quandary. They got into trouble in the first place largely because their costs were too high. Now, they fear adding too many workers.

Ford, for instance, is “squeezing every last component, transmission, engine out of the existing brick and mortar,” says Jim Tetreault, vice-president of North America manufacturing.

Still, the hiring surge bolsters the argument of those who supported the federal bailout of General Motors (GM) and Chrysler in 2008 and 2009.

And the hiring is good news for communities around the country that saw hundreds of thousands of manufacturing jobs disappear. Starting in 2005, GM, Ford and Chrysler closed 28 factories and eliminated 88,000 jobs. Parts companies cut another 234,000.

Now, if sales hit 15 million by 2015, as some experts predict, the three Detroit automakers could hire another 20,000 people, predicts Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor, Mich.

Laurie Schmald Moncrieff, president of a small parts-manufacturing company near Flint, Mich., says when demand for auto parts collapsed, she shifted production to parts for companies in green energy, aerospace and defense.

Now, automakers and other parts suppliers have her on speed dial, trying to line up everything from fuel pump parts to tools that make hoses. She just added six workers and may hire another five.

Like many parts suppliers, she’s having trouble finding people with the skills to run machinery in her plant.

The hiring binge couldn’t have happened at a better time for Michigan. Many of the new auto jobs came around the Great Lakes where the Detroit Three have most of their factories.

New jobs with auto companies don’t pay as well as the old ones. Under union contracts, companies can pay new hires around $16 per hour, a little more than half the pay of longtime workers.

Foreign carmakers are also shifting production to the US because of higher sales and the weak dollar, which cuts the profits they get from selling vehicles exported to America.

Nissan is adding workers in Tennessee. Toyota just hired staff at a new plant in Blue Springs, Miss. Honda is hiring in Alabama and Ohio. Hyundai and Kia plants in Alabama and Georgia are running flat-out but can’t meet demand for some models such as the Hyundai Sonata and Elantra.

The sales rebound comes with risks that are familiar to Detroit. Crank up production too much and carmakers have to sell vehicles at deep discounts. Boost production too little and companies could run short of vehicles such as pickup trucks.

GM also will try to handle growth by stretching factories, says North American president Mark Reuss. But he thinks the company will have to hire more workers if sales this year reach 13.5 million or beyond.

© 2012 The Canadian Press